Banking / Savings Account
Ridofranz / Getty Images/iStockphoto
If you have the lucky problem of trying to figure out where to keep money above and beyond what you need to pay your monthly expenses, you may be uncertain as to how much is the right amount to keep in a standard savings account. Don’t fret, and don’t make any hasty decisions. Experts have some simple recommendations.
GOBankingRates’ Best Banks 2022: See the Top Banks, Credit Unions and More
See: GOBankingRates’ Best Online Banks of 2022
The Gold Standard: 3-6 Months
For those who can, it’s a good idea to have a safety net of at least three months of bare minimum living expenses, according to Scott Alan Turner, a certified financial planner with Rock Star Financial Planning. “We hope for the best, and plan for the worst. After COVID-19, many people realized they could lose their jobs for a long time or have their wages whacked in half.”
Another reason for a three-month minimum is that should you need to collect disability payments, there can be up to a 90-day waiting period before those benefits become available, Turner said.
Another perk is that having cash on hand makes it possible to “take advantage of opportunities as soon as they come up,” Turner pointed out. Whether that’s a sale or a great deal, with cash on hand, “you can get that deal on the spot.”
Read More: Gen Z and Millennials Favor National and Online Banks, Survey Shows — What Does That Mean for the Future of Credit Unions?
Enough To Avoid Debt
Though the specific dollar amount will vary from person to person (or family to family), having money in your savings account allows you to avoid going into credit card debt or taking out costly loans, said Adam Wood, co-founder of RevenueGeeks.
He actually recommends saving quite a bit more — for single-income households, having a savings account of 12 months’ worth of income, and for two-income households, six months’ worth. “Remember that your monthly expenses may not always match your monthly income.”
Check Out: Learn More About GOBankingRates’ Best Checking Accounts of 2022
Enough To Feel Comfortable
The truth is, some people are more comfortable with a higher amount of risk, so how many months’ worth of income you have saved comes down to your preference, said Scott Stanley, a certified financial planner and founder of Pharos Wealth Management. “We all feel inherently different about our money–our comfort level varies based on our background, our family history, levels of anxiety, job security, etc. Simply put, if you feel more comfortable with six months, …….
