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Choosing the right bank account is an important decision, as it can impact how easily you’re able to manage your daily finances. You might be wondering how many bank accounts you should actually have — and how much money you should keep in each one — so let’s explore.
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Derek Ripp, a CFP and partner at Austin Wealth Management, suggests structuring your cash into three groups:
1. Routine, Recurring Expenses
These are the predictable bills that come in every month. Since you’ll need to access this money often, it’s a good idea to keep it in a checking account. This type of account allows an unlimited number of withdrawals. Some offer higher interest rates, though you won’t (and shouldn’t) keep enough money on deposit to earn any significant returns.
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Start by figuring out the lowest amount of money you need to cover your monthly expenses, then make sure you maintain at least that balance in your checking account at the start of each month. “The amount you hold here is up to you,” Ripp said. “Some people keep the bare minimum and others prefer more of a cushion.” Keep in mind that if you don’t keep enough money in your account, you could get hit with overdraft fees, which average a hefty $33.58.
So, be sure to monitor the balance regularly. Fortunately, most banks allow you to set up email and text alerts that notify you when the balance drops below a certain threshold.
2. Larger, Planned Expenses
Aside from daily spending, you might have plans for larger purchases over the next year or two. For example, you might be saving up for a new car, a major home repair or a big vacation.
These types of expenses can benefit from a sinking fund. This is a special savings account for irregular expenses that you know are coming and can prepare for. For example, if you’re planning to buy a car in one year, you can divide the cost of the down payment by 12 and set aside that amount in your savings each month. This helps spread the cost of a big-ticket purchase out over time so it’s more manageable.
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A regular savings account is a great place to store your sinking fund. However, you can give your savings a boost …….
Source: https://www.gobankingrates.com/banking/checking-account/how-much-money-to-keep-banking-accounts/
