How Much Should You Keep in Your Checking Account? - Live Like a Mensch
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How Much Should You Keep in Your Checking Account?


Picture of one of my favorite famous ladies courtesy of Gage Skidmore

I've recently been re-watching some of my old favorite episodes of 30 Rock on Netflix. One excellent episode, entitled Rosemary's Baby (and featuring Carrie Fisher!), includes the following dialogue between Liz Lemon and Jack Donaghy:

Jack: So what are you gonna do with your money? Put it into a 401(k)?Liz: Yeah, I gotta get one of those.Jack: What?! Where do you invest your money, Lemon?Liz: I've got like twelve grand in checking.Jack: Are you an immigrant?

I've spent more time thinking about this tidbit of dialogue than any particular 20 seconds of a comedy show really deserves. First, I've found myself somewhat concerned that Liz's entire net worth is $12,000 that she keeps in checking. Then I find myself worrying about how Liz will be able to retire if she isn't even investing in her 401(k), because wasting mental energy on the fate of a fictional character is an excellent use of my time.

Finally, I find myself thinking about the amount of money she has in checking.

Because $12,000 in checking seems like a ridiculous amount to me (and I know that Tina Fey and the other writers chose that amount for that reason).

But just how much should you keep in checking?

The non-answer answer is "only as much as you need." (This is about as helpful as responding to the question "How old are you?" by saying "As old as my tongue, and a little older than my teeth.")

The problem is knowing how much you need. For me, I like to maintain my checking account like a revolving door. Money goes in there just so that I can use it for specific purposes. The majority of my money is placed somewhere else, where it will earn me at least a little interest. Yes, I do like to keep a cushion of cash in checking, but my idea of a cushion is much smaller than other peoples'--like J's preferred cushion, for example.

For instance, when I was working my first job out of college (as a bookseller at Barnes and Noble), I was paid every Friday. At the time I earned $8.25 per hour, and I generally got about $250 with each weekly paycheck. After receiving and depositing my paycheck (because this was 2001 and therefore the dark ages, and direct deposit wasn't exactly a thing yet), I would endeavor to have a cushion of $18 at the end of my necessary spending for the week to get me through until the next payday. If I had a cushion of $25 or $30, that would be even better, but once I got to about $40, I started moving a little money into savings, because that was just way more than I needed in an interest-free checking account.

Had J and I known each other at the time, I believe this might have given him a heart attack.

These days, my cushion is larger, but still hovering between $100 and $200--since I balance my checkbook for fun and I have savings accounts that I can transfer money from in case of emergency.

J, when I met him, liked a cushion of about $5000 in checking, which drove me up the wall. "That money's just sitting there!" I'd tell him, and then I would start muttering something about compound interest.

Our current compromise is that I keep my checking cushion where I like it, and I maintain his checking cushion at $1000 to prevent any potential medical consequences. He studiously avoids finding out how little I keep in my account.

(I would like to say, however, that a low checking account cushion also has the added benefit of taking the wind out of the sails of any large impulse purchase. It's at lot easier to justify spending $8000 on a wedding dress when you're not even in a relationship if you're able to just write a check.)

J and I are clearly at opposite ends of the checking account spectrum. He might be tempted to emulate Liz Lemon (except for the fact that he does, in fact, save for retirement), if he weren't married to a "I'm sure 50 cents is a reasonable cushion in checking" type. Sometimes, it's a wonder that we get along as well as we do.

So how much do you keep in your checking accounts? Do you do the full Liz Lemon and just park all of your money in there because you're busy, or do you overanalyze every penny in your possession like a certain aspiring mensch? Or somewhere in between?



haverwench said:

I used to be like you, keeping no more in checking than I expected to need for upcoming expenses. But lately I've become inclined to keep a larger cushion in there, because (a) I get only a limited number of free transfers each month, so I can't just keep adding more from savings every time I run short, and (b) basically, my checking account *and* my savings account both earn peanuts. Face it, compound interest doesn't do much for you when you're compounding one-quarter of one percent. Just today, I had to move some money from savings to checking to cover a larger-than-average credit card bill (it included some veterinary bills and some home improvement expenses). I could have transferred $2500 and had enough to pay the bill, but that would have left me with only $50 or so in checking, so I tacked on an extra $200. I don't have any immediate need for it to be there, but it'll get used eventually, and it's not like it's really costing me anything to take it out of savings.

Of course, all this is my savings I'm talking about, not my retirement fund. I have an IRA for that, which I fund up to the tax-deductible maximum each year.  But frankly, I don't even think of the cash in that fund as money I have; it's money I *will* have when I retire.

July 10, 2013 11:12 PM

Emily Guy Birken said:

@haverwench, I HATE it when banks limit the number of free transfers you get each month. I would certainly keep more of a cushion in checking if that were the case with my bank. Feh. Banks will do anything to make a buck off your money.

July 11, 2013 10:05 AM

haverwench said:

I can understand why they do it, though. It would be a big hassle for them to have to keep track of 50 transfers a month. The limit on my account is six, and I've only exceeded it once.

July 11, 2013 12:46 PM

frugal_fun said:

"I can understand why they do it, though. It would be a big hassle for them to have to keep track of 50 transfers a month. The limit on my account is six, and I've only exceeded it once."

I think it was a hassle in ye old green ledger days. It's hard to imagine that it taxes the new fangled computers.

If the savings is really a Money Market, though, withdrawals (other than in person) from those are limited by law. All MM accounts are limited to 6 "remote" transfers (checks/online) per month. (At least, that's my understanding)

July 12, 2013 3:12 PM

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