How much do you keep in checking?

[SevenBridgesRoad]

Is having a 8-10K checking balance out of the ordinary? Frowned upon? Just trying to simplify. Thanks.

No frowning here. We have checking at a local credit union and all other accounts* with Vanguard. We always keep in checking the full amount to cover spending for the current month, plus a pad of about 20%. And on the first of each month Vanguard automatically sends to checking the next month’s amount. The vast majority of bills are automatically paid via checking, so our approach keeps everything very simple.

I reconcile the CU statement once a month, keep track of upcoming expenses with Quicken once a month and occasionally adjust CU balance as needed (property tax month, for example). We look at the credit card statement once a month.

So while not optimized for every last dollar of interest, the trade off is a working, simple, almost completely automatic system which neither my wife or I have to worry about. Sleep well at night.

*except HSA

[2015]

I'm amazed at the people that are keeping thousands in an account to maintain free checking. There are plenty of online banks or local credit unions that offer free checking with no or minimal balance requirements.

Yes, but I have a safe deposit box as part of my estate planning so keep about a month's expenses in checking. I could obsess that this is just one more thing I'm not maximizing (as opposed to optimizing) but I'm too busy marveling at the snow that dusted the mountains as a result of last night's rain.

[Doom&Gloom]

I keep just enough (at least $1500) in them to avoid incurring maintenance fees.

[michaeljc70]

I used to be diligent about moving money from my brokerage MM to my checking only as needed (and vice versa). Given how low rates are now, I don't bother. I move enough for a couple months expenses at least at a time. In fact, I just got the January interest and I almost wish I could opt out as it takes more time to record the 60 cents interest than it is worth.

Edit: I also have every credit card set to autopay (I try to use one or two, but sometimes due to bonuses or whatever I use a rarely used card). Keeping a higher than normal balance means I don't have to track this that closely.

[SmileyFace]

Close to nothing - all my auto-pays happen when my check drops in - I then take all excess out and into HY-Savings. I generally keep about $500 in just in case I need cash for something or some other small bill pops up. Otherwise - I can pull from HY-Savings in 24 hours so why have money sitting there not making anything.
I am surprised folks have 3 months expenses sitting there (perhaps they have high-interest bearing accounts).
My account is free with no minimum balance (also surprised at the high minimums some folks have...)

[Sandtrap]

I currently have a ROTH through Vanguard, a high yield savings account at CIT, a savings account at my local bank(.35% interest), and a checking account at the same bank. Wanna ditch the local savings account and spread the funds out between the checking and high yield savings. How much on average do you keep in a checking account? Is having a 8-10K checking balance out of the ordinary? Frowned upon? Just trying to simplify. Thanks.

It depends on the following:

Total assets
Size of emergency fund, or available liquid funds
Size of "fixed" funds (MM, CD, etc).
Working capital requirements (business, personal)
Monthly income
Monthly expenses

What is optimal for your financial needs is not the same for another and vs vs.

Actionably:
if having an 8-10k checking balance with that requirement for working personal/business capital per month for you works and it is what is comfortable for you, then great. And simple.

[roymeo]

Enough that I don't have to worry about the occasional property tax payment forcing me to shift money around, but not so much that I can pay for an earthquake retrofit or solar panel installation without shifting money around.

[supersharpie]

10k, which is between two and three months expenses. We treat this balance as our emergency fund.

[SevenBridgesRoad]

...(perhaps they have high-interest bearing accounts).

Nope, not on the credit union checking account. Not sure what the interest rate is but it's low.

[dbr]

Our checking account seems to have a minimum residual of about $1000 after everything to be paid out is paid out and before the next increments of what comes in comes in. That is enough to cover anything that comes along that might be a little unexpected. Of course, we are only a couple of days away from finding more money to put in if needed.

An overlooked factor is that balances on credit cards can be a lot more than that, and credit cards are instantly accessible for money at almost any store, at an ATM, or for spending on line.

[IcedDog]

I like to keep a floating $2K in checking (~1.5 months expenses), and when it builds up to about $3K, I'll siphon off a grand and either send it to high-yield savings, an IRA contribution, or towards my mortgage as an extra payment off principal. I prefer not to transfer money from savings to checking unless I absolutely have to, and this setup allows me to pay for whatever I want in a given month without having too much cash not earning anything, or carrying a balance on credit cards.

[GerryL]

I was periodically stuffing as much as $8k into checking when I had little income (pre-SS). Ensured my credit cards and other bills, which are on auto-pay, would be covered, especially when I was charging upcoming trips -- or when I was traveling. Now that SS has started, I will probably be comfortable letting checking go down to under $2k knowing that a deposit will be made to boost it back up within a month. It is linked to a modest MM account, so I can easily transfer $$ if needed.

When I was working and getting a regular paycheck 2x a month, I tried to keep my checking up towards $1k minimum, but that had nothing to do with min. balance requirements.

[Olemiss540]

Typically 5-8k. Just opened a Fido CMA to try and minimize.

[Edie]

$100 in checking.

When the paycheck comes in, we pay all of the bills and anything above $100 gets invested or the added to the cash fund in the Vanguard Federal Money Market sweep account. I believe the money should always be working for us. We float using the credit card. The credit card company can eat the opportunity cost.

So are you paying your credit card ahead of the due date?

I was thinking oh, it would be good to just pay all bills at once, so that I'm not tracking through the month when stuff is due (everything is autopaid, but I'm tracking how much is going out for each bill and when), but then I was curious about the above.

The credit union balance fluctuates between 20 and 320, because I only send 300 there each month to pay the car note, but our other two checking account fluctuate a lot more than that, but generally both stay below 2k.

[emoore]

I keep $5k in my checking account at the end of the month. Anything over I move into savings.

[lostdog]

$100 in checking.

When the paycheck comes in, we pay all of the bills and anything above $100 gets invested or the added to the cash fund in the Vanguard Federal Money Market sweep account. I believe the money should always be working for us. We float using the credit card. The credit card company can eat the opportunity cost.

So are you paying your credit card ahead of the due date?

I was thinking oh, it would be good to just pay all bills at once, so that I'm not tracking through the month when stuff is due (everything is autopaid, but I'm tracking how much is going out for each bill and when), but then I was curious about the above.

The credit union balance fluctuates between 20 and 320, because I only send 300 there each month to pay the car note, but our other two checking account fluctuate a lot more than that, but generally both stay below 2k.

Yes. I pay every two weeks.

[Dale_G]

Enough so I don't have to pay attention to the balance. The direct deposits and automatic payments are pretty constant I take a peek monthly. I love not having to maintain a check register.

Dale

[JackoC]

If you'd have asked me to guess I'd have said the balance averaged around $4k. Then I downloaded the daily balances for the last year and took the average: $15k. It was pushed up by things like:
-both our Vang stock funds pay distributions to the checking account then we decide where that money will reside permanently, but it's in there a few days typically
-putting a relative lot of money in checking to write estimated tax and tax balance checks, but the checks aren't cashed for days or weeks.
-moving money through the checking account to fund or redeem CD's. Again it's not always taken out in just one day.

This made me move recently to a checking acct that pays 1.75% rather than zero, and does not force us to jump through all the hoops the 3%-type checking accounts seem to, or only pay the high interest on limited balance. At 1.75% v the pre-tax equivalent of ~2.5% in VMFXX Vang settlement fund (checking account is fully Fed and state taxable, most of VMFXX interest is not state taxable), it's not as big a loss if larger amounts of money get stuck in the checking account for a few days from time to time. And I also intend to reduce that.

A checkbook for the VMFXX would avoid some of that, but I'm more comfortable if that avenue for fraudulent withdrawals doesn't exist, since there's usually a fairly large amount in that account. It's also easier to tally spending when it comes from one account. Our back up for writing paper checks if the main checking account doesn't work is one of wife's bank money market accounts with a more moderate amount in it than VMFXX and a reasonably good rate.

[Trism]

I'm amazed at the people that are keeping thousands in an account to maintain free checking. There are plenty of online banks or local credit unions that offer free checking with no or minimal balance requirements.

Minimum balances aren't the only way to get free checking, even at large banks. Direct deposits as low as $500/month do the trick with Chase and Wells, and they and many banks offer other options.

[Clever_Username]

I keep enough that I can make my end-of-month bill payments (not including credit card, which cycles near the end of the month but I have a week or two to pay it) and still have the minimum balance if my paycheck is late, even though my checking account has no fees if there is a qualifying direct deposit (and there is).

Then my paycheck comes in near the end of the month, I pay the rest of my bills (now including credit card), and reduce the balance to the appropriate amount by moving the rest to either Treasury Direct or Vanguard, depending on the month and plan.

[dratkinson]

I keep 3mos of living expenses in my Presidential Bank checking account earning 8%/yr tax-free. (Don’t go looking because you will not find it.)



How? Money is fungible. To a kid, a dollar from mother is worth the same as a dollar from father---he doesn't care who gives him the money.

Example. Assume your living expenses are $1K/mo, you keep 12mos of living expenses in checking, and all of your recurring bills are setup to pay by ABP (automatic bill payment) targeted to a 2% cashback CC. (The CC is paid by ABP targeted to your checking account.)

Each month you pay $1K of living expenses by CC, which earns $20 (=$1K x 2%) in cashback. In one year you will earn $240 (=$20 x 12) in cashback.

Since you keep $12K in checking, your return on that $12K is 2%/yr (=$240/$12K).

But if your reduce your checking balance to 3mos of living expenses, then the return on that $3K becomes 8%/yr (=$240/$3K).


Bottom line. You don't need to feel like you are leaving money on the table by not chasing bank teaser rates. Instead, get your return from ABP by CC.

This means you can keep your life simple by choosing banking relationships based on convenience, not teaser rates.



Disclosure. I opened the Presidential Bank checking account chasing their 4.05% APY teaser rate---long since gone. I keep it as my primary checking because I like the paper statements and decent phone customer support.

Keeping 3mos in checking means I don't (normally) need to worry about my checking balance until I reconcile next month's statements (banking, investing), and rebalance accounts.

I keep my savings in a local B&M CU that mails paper statements, and is part of the CU COOP network---easy nationwide access.

Redundancy is also good. I have a second ($0 balance, free) CU checking account, just as a CYA in case I'm ever locked out of my primary checking account. Both (primary + backup checking) accounts are linked to Vanguard so money is available within 2-business days (5-days max over a 3-day weekend).

And my mmkt (VMSXX) has checkwriting setup. But I've only every used it for gifts (graduation, wedding). It gives me an opening to talk to young folks about investing when they ask, "...what's a tax-exempt mmkt fund and how do I get one?"

[GreatLaker]

Minimum about $5k.

I used to watch it carefully and let it get down near the minimum balance to get zero fees. But I'm retired and having been POA for someone elderly I see how finances can get to be a pain. $5k minimum lets me not have to worry about moving money around or telling someone how to access my saving account and transfer money to checking to cover bills if I suffer the misfortune of an illness or short hospital stay. One less worry.

[UpperNwGuy]

As little as possible, and I run it to zero at the end of each month, then start afresh on the first of the following month.

[Tiffku08]

....,

[KlangFool]

Solid 3 months expenses but not a dime over.

+1.

KlangFool

[dbr]

Solid 3 months expenses but not a dime over.

+1.

KlangFool

How does one do that "not a dime over" thing? The coefficient of variation of my monthly expenses over the past fifteen years is 50%. The range is 375% of the average (meaning some months with very high expenses).

[KlangFool]

Solid 3 months expenses but not a dime over.

+1.

KlangFool

How does one do that "not a dime over" thing? The coefficient of variation of my monthly expenses over the past fifteen years is 50%. The range is 375% of the average (meaning some months with very high expenses).

dbr,

1) I do not do the "not one dime over" thing.

2) In my case, the targeted number is 15K. If I know I need to pay a substantial expense for that month, I pre-transfer the money into the account. For example, college tuition.

3) I keep my checking account in the range of 10K to 15K.

KlangFool

[gvsucavie03]

$8,000-10,000. 3% Max Checking through LMCU. Credit card monthly balance, annual budgeted savings and roughly half of my emergency fund stays in checking to take advantage of the monthly dividend. Between this and cc rewards for regular spending it's roughly $150/month.

[blueman457]

Working person here: I keep a month's worth of salary checking to give a buffer. Anything about goes into savings/investing.

Blue Man

[infotrader]

About 5,000, but linked with my vanguard brokerage settlement account, so I can transfer money/or write checks directly when needed.

[bluelight]

Enough to pay my bills plus $1K minimum required. Any amount over that gets transferred to savings.

[FrugalInvestor]

We keep about $1,0000 in our checking. Each month we transfer enough from our money market fund (probably equivalent to your high-yield savings) to pay our credit cards and other bills and replenish the amount necessary to take the account back to $1,000.

[John151]

About three months worth of expenses. Anything over that goes into my Vanguard money market fund.

[nisiprius]

Between $10,000 and $12,000. Basically, my wife and I sort of regulate our spending by having our normal income and normal expenses flow through our checking account, and watching the balance is how we detect if we're spending too much, and $10,000 is the amount of buffer we like to have. I can do the math on how much interest we're foregoing, and, shrug, if you like, I consider having that high a balance to be a luxury that we're willing to pay that much for. Of course, I haven't checked all the bank rules lately but it does help us meet their requirements for waiving fees, we get half price on the safe deposit box, it's not pure loss.

I literally download the balance into a spreadsheet and chart it, and eyeball it to see if we're in an upward or downward trend.

[DB2]

I don't keep more than one month's expenses ($3000-4K).

[mickeyd]

$1000.

When I reconcile my checking account each month I generally have a balance north of $1k. Any amount of $ over that amount gets sent to savings @ PMMF. That leaves me a balance of $1000 to begin the next month.

This has been my methodology for about 30 years.

[j0nnyg1984]

$0

Every penny is kept in my Cap1 money market. Near the end of the month, I determine how much I need to pay off my credit cards, and I transfer that money to my BoA account. Then I transfer enough into my checking to cover my mortgage and HOA autopays, which come out on the 1st.

I don’t have a checkbook and I don’t use a debit card

[Kenkat]

It usually varies between 4-6 weeks expenses.

[yousha]

About $15000.

[Clever_Username]

I don’t have a checkbook and I don’t use a debit card

How do you acquire cash for the (possibly rare) circumstances where you need/want it?

[baconavocado]

We usually keep about $3k in checking and $20k in savings as the accounts are linked and our credit card payments come out of savings.

However, I was noticing this month that both checking and savings accounts are paying almost no interest: checking, 0.01% APR; savings, 0.06% APR. Interestingly, the savings account is called "High Yield Savings".

This is a Wells Fargo Portfolio account and requires a $25k minimum combined balance, including credit cards, etc., to avoid fees and maintain benefits. Since money market accounts are currently in the 2.3% range, I figure I'm paying about $30-40/month in lost interest to maintain this situation. I'm now trying to find out if I can move some of this idle cash from savings to a money market account in their brokerage and still be able to satisfy the $25k minimum.

[Sandi_k]

1 month of expenses at the beginning of the month, less than $200 at the end of the month.

+1.

Everything else gets moved to investments or short term savings accounts once per month.

[j0nnyg1984]

I don’t have a checkbook and I don’t use a debit card

How do you acquire cash for the (possibly rare) circumstances where you need/want it?

I have had the same “emergency $100 bill” folded up in the back of my wallet for probably 6 years now. I have like $42 in my wallet currently, from paying for stuff with a CC and having family / friends give me cash. I also have a few hundred in my dresser to play poker, rarely.

If I can’t buy it on my CC, I try not to buy it.

[goodenyou]

A few thousand over my expenses and pending credit card balance. My expenses are fairly stable and routine. The rest is swept into Prime MM and invested from there. I keep some money at Schwab because they are WAY faster at transferring money back and forth between bank checking account should I need to access a lot of money is a hurry. Vanguard is as slow as molasses.

[yogesh]

About 6 months expense. It’s our Fidelity CMA account that acts as checking, billpay, saving and emerging all in one. In case of emergency things remain as-is/normal till it gets to zero (6 month buffer) with no action needed from spouse.

Everything above that goes to taxable investing. I wish there was IFTTT style automation that did automatic investment beyond $x threshold in checkin like betterment smartdeposit.

Trying to be minimalistic with as few accounts as possible for spouse to manage or not manage

[abuss368]

One checking account with minimal cash. Can’t get any simpler than that.

[abuss368]

We had multiple accounts at different banks years ago. Closed everything and focused on minimalism and simplicity.

It has paid off.

[orhkaf]

I keep 40k in cash (2-3years of expenses) at all times at the local bank.

Helps me not worry when the market is doing poorly.

[Capricorn51]

Right now, I have a typical balance of 8 months or so of net income at TD Bank in checking. I am researching what their minimum for no fee checking is and will reduce my checking balance. I keep TD since it is a high profile B&M operation in my area with lots of no fee ATM's. For out of network ATM's, I use my Fidelity account which waives fees.

Despite the fact that I only go into a B&M branch maybe 4 or 5 times a year to do transactions, it is very nice to have.

[JD2775]

$0

Every penny is kept in my Cap1 money market. Near the end of the month, I determine how much I need to pay off my credit cards, and I transfer that money to my BoA account. Then I transfer enough into my checking to cover my mortgage and HOA autopays, which come out on the 1st.

I don’t have a checkbook and I don’t use a debit card

I have a similar setup (BofA checking, CapOne MM). Isn't there a transfer lag to and from CapOne MM? You must allot for those extra days needed to process.