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How much money should you keep in it?

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As you move forward financially and keep saving money, you will hopefully start investing some of your money rather than allowing it all to sit in your bank account. But that begs the question: How much money should you leave in your bank account? You don't want to leave more than is needed when that money could be earning more for you elsewhere, but you also don't want to be without accessible cash in case of an emergency. 

There's not a one-size-fits-all answer to this question, but there are some general guidelines you can follow to determine how much money to keep in your bank accounts.

Your Checking Account

Checking accounts generally do not earn interest, so you don't want to park money in your checking account long-term. It's okay to let your savings accumulate in your checking account for a little while, but you should periodically transfer out excessive savings to a savings account or other investment account where it can keep earning for you.

At any one time, it's a good idea to have one month's worth of expenses in your checking account. This way, if something happens with your direct deposit or you happen to get paid late, you will still have the money on-hand to pay bills. You also ensure you don't get charged an overdraft fee if an automatic payment is processed before your paycheck hits the account.

If you don't know the total of your monthly expenses, this is a good time to sit down and add them up! Review the withdrawals from your checking account over the past month. If you spent $2,500 from your checking account last month, for example, then your goal should be to never let your checking account balance fall below that number. In other words, keep $2,500 (or one month's worth of expenses) in your checking account as a cushion. Your actual balance will often be higher than this.

Your Savings Account

Savings accounts do add interest, but the interest rate is usually pretty low. People use their savings accounts in different ways, but it is pretty typical for people to keep their emergency fund in this account. If you're saving for a short-term goal, such as a vacation, you can also keep those funds in your savings account. The money you're saving for a longer-term goal, such as retirement or buying a home in 10 years, is better off in a CD or bond fund where it will earn a little more interest.

The bare minimum amount you want to have in your savings account at any time is about three months' worth of expenses—in other words, your emergency fund. This is the money you can use to cover costs if you have a surprise medical bill, a car wreck, or some other expensive accident, or if you happen to lose your job and need to cover living expenses until you find a new one. 

If you work in an industry where it can take a while to find a new position, or if you consider yourself at-risk for suffering a more expensive emergency, then it's a good idea to keep closer to six months' worth of expenses in your savings account as an emergency fund. Keep saving money, a little at a time, until you reach that goal.

Make sure you're keeping a close eye on your checking and savings accounts. Keeping one month's worth of expenses in your checking account and 3-6 months' worth of costs in your savings account is a good guideline to abide by.

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