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Your checking account can play an essential role in your financial life. It allows you to receive your payroll direct deposits, pay bills, write checks, make debit card purchases, withdraw cash at ATMs, and even send money digitally to friends and family.
However, since these accounts generally pay little to no interest, it can be tricky to figure out exactly how much money to keep in your checking account. If you keep the balance too low, you risk overdrafts, bounced checks, and account fees. If you keep the balance too high, you give up the opportunity to earn a better interest rate elsewhere.
So how much money should you keep in your checking account? Below, we’ll explore the average checking account balance — and the factors that can affect it.
Key Points
• The amount of money that someone keeps in their checking account will vary based on several factors, including age, income, and cost of living.
• A common recommendation is to keep one to two months’ worth of expenses in your checking account.
• Since checking accounts generally have lower interest rates, it’s a good idea to keep extra money in a savings or other high-interest account.
• Emergency funds should usually be kept in a savings account and cover three to six months of expenses.
• While income and age can influence the amount people hold in their transaction accounts, it’s essential to tailor your balance to your specific living expenses and financial goals.
What Is Considered a “Normal” Balance?
There’s no one ideal amount to keep in a checking account since everyone’s financial situation is different. A common rule of thumb, however, is to keep around one to two months’ worth of living expenses in either a traditional or online checking account.
So, for example, if your monthly expenses are $4,000, you might want to keep around $8,000 in checking. This helps ensure you’re able to cover your short-term expenses and don’t accidentally overdraft your account or dip below the minimum balance required to avoid a monthly fee.
While a “normal” checking account balance will vary by income and expenses, we can get a sense of the average checking account balance in the U.S. by looking at the Federal Reserve’s most recent Survey of Consumer Finances (which is based on 2022 data). According to the Fed, Americans hold a median balance of $8,000 in transaction accounts (which include both checking and savings accounts).
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Average vs Median
Government data on the typical amount of money in checking accounts includes two different figures: the median and the mean (or average). For example, Americans hold a median balance of $8,000 in transaction accounts, but a mean balance of $62,410.
Why is there such a large disparity? The mean, or average, number is skewed by people who hold high balances. As a result, it doesn’t paint a realistic picture of how much money the average American is really keeping in the bank.
Think back to math class where you learned about the difference between mean and median. The mean, or average, balance in a checking account is determined by adding together every single checking account balance and dividing by the number of checking accounts. Extremely high and low balances can really skew that number.
The median balance, on the other hand, is the middle value when a data set is ordered from least to greatest. For instance, if you were analyzing five checking accounts, ordered by lowest to highest balance, you’d look at the balance of the third checking account to get the median:
• $300
• $500
• $2,000
• $10,000
• $20,000
Here, the median checking account balance is $2,000. However, the average balance of the checking accounts is $6,560.
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Factors Impacting Balances
There are a number of things that can impact the average amount in a checking account, including income, age, and geographical location. Here’s a look at three key factors that can lead to keeping different amounts in a checking account.
Income Levels
As you might expect, income level can have a significant impact on checking account balances. People who make more money tend to spend more on things such as rent, food, shopping, and entertainment. And when your living expenses are higher, you generally need to keep more money in your checking account.
Based on the Fed’s data, for example, Americans who are in the lowest 20% of income earnings have a median transaction account balance of $900. For those in the top 10% of income earnings, however, the median balance rises to $111,600.
Savings Rates
Interest rates on savings accounts can also impact how much people keep in their checking account. When annual percentage yields (APYs) for savings accounts are especially high, it’s natural to want to take advantage of that and keep more in savings and less in checking.
These days, keeping only as much as necessary in checking and moving your extra cash into savings can really pay off. While the average checking account interest rate is currently 0.07%, you can now find high-yield savings accounts offering rates of about 3.00% APY or more.
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High vs Low Cost of Living Areas
If you live in an area of the country where the cost of living is relatively steep, you’ll need more money available in checking to cover everyday expenses, such as rent, utilities, groceries, and gas. If you live somewhere with a relatively low cost of living, you can likely keep a lower-than-average checking account balance without running the risk of dipping into negative territory and, in turn, triggering fees or bouncing checks.
Balances by Age Group
Age also has a significant impact on the average checking account balance. As we get older, we tend to build wealth and, in turn, keep more money in transaction accounts, like checking accounts. Here’s a closer look at how checking account balances vary by age.
Average for Millennials/Gen Z
According to the Fed’s data, millennials and Gen Z keep somewhere between $5,400 and $7,500 in their transaction accounts.
| Age | Median Value of Account Holdings |
|---|---|
| Under age 35 | $5,400 |
| Age 35-44 | $7,500 |
Average for Gen X
The Fed’s survey shows that adults aged 45-54 (Gen X) have a median balance of $8,700 in their transaction accounts.
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Average for Baby Boomers/Retirees
Baby boomers and retirees have the highest average amount of money in their checking and other transactional accounts. Depending on their age, boomers and retirees typically have median balances somewhere between $8,000 and $13,400. Interestingly, account balances tend to start decreasing in adults aged 75 and older.
| Age | Median Value of Account Holdings |
|---|---|
| 55-64 | $8,000 |
| 65-74 | $13,400 |
| 75+ | $10,000 |
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Balances by Household Income
Government data shows large disparities in account balances between low-, mid-, and high-earners in the U.S. Here’s a detailed look at how household income affects the amount of money Americans keep in their transaction accounts.
| Income Range Percentile | Median Value of Holdings |
|---|---|
| Less than 20% | $900 |
| 20%-39.9% | $2,550 |
| 40%-59.9% | $7,400 |
| 60%-79.9% | $15,760 |
| 80%-89.9% | $33,800 |
| 90%-100% | $111,600 |
Typical Emergency Fund Recommendations
Personal finance advisors generally recommend keeping at least three to six months’ worth of living expenses in the bank to help cover the unexpected, such as an expensive car or home repair, a medical emergency, or loss of income. So, for example, if your monthly living expenses are $4,000, you may want to keep $12,000 to $24,000 in your emergency fund. If you’re self-employed or work seasonally, however, you may want to aim for closer to six to 12 months’ worth of expenses.
That said, your emergency savings should generally not be part of your checking account balance. Instead, you’ll want to keep that money in a savings account at a traditional or online bank or credit union. For one reason, you’ll be less tempted to spend your emergency fund on nonessential purchases if it’s a little further out of reach. For another, the interest rate for a savings account is typically higher, which will help your emergency fund grow over time.
The Takeaway
The average or normal checking account balance varies by age, income, lifestyle, and other factors. Ideally, you want to have enough in checking to cover one to two months’ worth of living expenses. This can help you avoid accidentally overdrafting the account or dipping below any required minimums. You can then move any additional cash to an account that offers a higher return, enabling your money to grow faster.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
How much does the average person have in their checking account?
The average checking account balance can vary significantly depending on age, income level, spending habits, and other factors. According to the Federal Reserve’s most recent Survey of Consumer Finances, Americans have a median balance of $8,000 in transaction accounts (which include checking and savings accounts).
Can you have too much money in your checking account?
Yes. Keeping too much money in a checking account can be inefficient because these accounts typically offer low or no interest. A good rule of thumb is to keep enough money to cover one to two months’ worth of expenses in checking and move excess cash to an account where you can earn higher returns, such as a high-yield savings account, an investment account, or an individual retirement account (IRA).
What are good accounts to keep emergency funds?
It is generally recommended to keep emergency funds in a savings account, rather than a checking account. The savings account could be with a traditional bank, an online bank, or credit union. The interest rates on savings accounts are typically substantially higher than those of checking accounts, meaning money stored in those accounts could earn more over time. In addition, the money is not as readily accessible as in a checking account, which means you’ll be less tempted to use it.
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