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If you follow a set monthly household budget, then you know how much you need to pay toward rent or mortgage, utilities, insurance and other expenses on a regular basis. Even with these numbers laid out each and every month, knowing exactly how much money to keep in checking versus savings can feel like a guessing game. While there is no universal amount that works for everyone, these tips can help you land on the right number for you.

Take a look back at your transfers to and from savings

The first indication that you may be keeping too much or too little money in your checking account is how often you make transfers to and from your savings account, and in what amounts. If you are routinely making transfers from savings into checking that are close or equal to your monthly expenses, you’re likely keeping your checking account balance too low. Consider the possibility that you forget to make your monthly transfer; would you overdraft your checking account? If the answer is yes, consider keeping more of your paycheck in your checking account to avoid that situation in the future.

On the other hand, if you find yourself making large transfers from checking into savings just a couple times a year, you may want to consider setting up automatic transfers each month to help your savings grow. This strategy is not only a simple way to help you reach your savings goals, but it’s also a good way to avoid spending more than you need to from each paycheck.

Remove your highest and lowest spending months from the equation

Whether you do the majority of your holiday shopping in October or wait until the last fleeting moments before stores close, you likely have a pattern of annual spending that spikes during one particular month of the year. Birthdays and anniversaries can also create this effect. So if you’re factoring these months into how much money to keep in checking, you may be overinflating your numbers during the rest of the year.

Similarly, the slower weeks and months can lead you to underestimate how much money to keep in checking. When doing your calculations, remove these outliers, but remember to add them back in when it’s time to set your annual and monthly household budgets.

Keep a rainy day fund

Many financial experts will recommend that you keep about two months’ pay in your checking account to cover monthly expenses, unexpected costs and general cost of living. While it’s a good rule of thumb, it’s not set in stone when it comes to how much money to keep in checking. The best bet for making sure your regular bills are covered, as well as unplanned expenses and opportunities, is to maintain a rainy day fund.

A rainy day fund is a separate checking account with roughly three months’ pay that can be used when the unexpected arises. Rather than keeping a large lump sum in your regular checking account, your rainy day fund can house enough money to save you from dipping into savings without the temptation to spend, simply because it’s there. This safety net or emergency fund, as it’s often called, is a good way to give yourself peace of mind without compromising your savings plan.

While there’s no magic number to tell you how much money to keep in checking, there are simple ways to evaluate your personal cash flow and find what works for your household. Looking to open a new checking account or to finally get that rainy day fund started? Visit our website to learn more.

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