Bank like a financial pro with the Alliant mobile app. Make payments, deposit checks, manage cards and so much more.
Renovate your kitchen, pay off high-interest debt, or have access to emergency funds when you need it with an Alliant Home Equity Line of Credit.
Browse new and used vehicle inventory, and qualify for a rate discount when you buy!81
Separate each of your savings goals into an Alliant Supplemental Savings Account so you can visualize your progress.
By Jamie Smith
When you open a bank account, it's typically a checking account that provides direct access to your money when you need it. Keeping all your money in one account isn't the best way to maximize returns, so opening another account, such as a savings account, makes sense. When you have two accounts open, you may wonder how much money to keep in each. Check out this guide that outlines how much money you should keep in checking vs. savings, as well as other options for storing your money.
Before we dive into how much money to keep in each account, here's some helpful information about how checking and savings accounts differ. The main difference is that a checking account is a transactional bank account, which makes it easy to access that money when you need it. A savings account is less transactional by nature, so it won't come with as many ways to access the money. Banks rarely issue debit cards linked to savings accounts. You also may not be able to link your savings account to Apple Pay or Google Wallet or get paper checks.
The purpose of the account and the access to the funds in it are two of the main differences. Some banks also have age restrictions on checking accounts that don't apply to savings accounts. The accounts will also differ in their interest rates. A checking account generally has a lower interest rate than a savings account. However, you may be able to find some high-interest checking accounts that help you earn on your spending money.
Now that you understand the main differences between checking and savings accounts, you can figure out how much money to keep in each account.
You need enough money in your checking account to cover your everyday expenses, including:
You may also have additional expenses, depending on where you live and your lifestyle choices. It's best to keep enough money in your checking account to cover at least two months of these consistent expenses. You might want to increase that amount if:
An overdraft fee is a fixed amount you have to pay if your bank account level dips below the minimum amount. Some checking accounts have a zero minimum, so you'd pay an overdraft fee if you paid for something that dropped the account below a zero dollar balance.
Keeping more than the cost of a few months' worth of everyday expenses in your checking account can cause you to miss out on more money. Since savings accounts typically have higher interest rates than checking accounts, keeping more of your hard-earned cash in a savings account can yield more money that goes back into your pocket every month. Ideally, it would help if you kept at least three to six months' worth of expenses in your savings account. If you lost your job unexpectedly, you'd be covered for at least a few months while you search for a new job.
You might also use your savings account to save for larger purchases, such as a vacation, car, or a down payment on a house. Some people have separate accounts for different expenses and financial goals, while others keep their extra income in their savings account. How you allocate your money depends on your personal preferences and financial habits. If it's tough for you to save money, keeping any extra in a savings account might make it easier to avoid spending. Like they say, "Out of sight, out of mind."
A savings account may have a higher minimum required balance than a checking account, so it's important to avoid dipping below that amount. Keep an eye on your accounts to make sure you have enough in both checking and savings to cover expenses and maintain at least the minimum balance in each.
Figuring out two to three months' worth of expenses often requires tracking. If you're not sure how much you're spending each month, take a few months to track all your expenses and figure out where your money goes. Tracking your expenses can also help you think before you spend, potentially spot fraudulent activity, and reach your financial goals. It's also a useful tool to figure out how much to keep in your checking account.
Apps and online tools make it easy to track your expenses, and some of these digital options can link directly to your bank accounts and credit cards to pull expenses and categorize them instantly. By tracking over a few months, you can see what expenses occur every month and compare those to one-off or unexpected expenses.
The latter category can also help you plan for your emergency fund. If you have health problems, allotting a little extra each month to a health care account can help you feel more prepared for extra bills for medical treatments and doctor visits. If your car breaks down, you might consider saving money for repairs or a down payment on a different vehicle.
Checking and savings accounts are some of the most popular methods for storing money, but they're not the only options available to you. Although savings accounts generally yield higher interest rates than checking accounts, those rates are often lower than other types of accounts that offer even less access to funds. Additional options include:
Earn more interest without a monthly fee (if you elect for eStatements) in an Alliant High-Rate Savings account.
Want to learn more about financial planning and saving tips? Check out these other articles:
Get even more personal finance info, tips and tricks delivered right to your inbox each month.
Thanks for subscribing to Alliant's Money Mentor newsletter! You will now receive personal finance tips in your email inbox each month.
You are leaving Alliant’s website to enter a website hosted by an organization separate from Alliant Credit Union. The products and services on this website are being offered through LPL Financial or its affiliates, which are separate entities from, and not affiliates of, Alliant Credit Union.The privacy and security policies of the site may differ from those of Alliant Credit Union.
You are leaving an Alliant Credit Union website and are about to enter a website operated by a third-party, independent from Alliant Credit Union. Alliant Credit Union does not manage the operation or content of the website you are about to enter. Alliant Credit Union is not responsible for the content and does not provide any products or services at this third-party website. The privacy and security policies of the site may differ from those of Alliant Credit Union.