If you've got more than a month's worth of expenses sitting in your checking account right now, you're probably losing money without even realizing it. Not because anything bad is happening -- but because that cash is just... sitting there. Doing nothing. Earning next to nothing.
I've spent years writing about personal finance and one of the simplest moves I see people overlook is this: being intentional about how much cash actually belongs in checking -- and moving the rest somewhere better.
The real cost of letting cash sit idle
Here's the thing: checking accounts pay almost nothing in interest. The national average is around 0.07% APY, according to the FDIC. Meanwhile, the best high-yield savings accounts are paying 4.00% APY or more right now.
If you've got $20,000 parked in a standard checking account, you're earning about $14 a year. But move that same money to a high-yield savings account and you're looking at $800 or more.
That's a $786 difference, just for keeping your money in a different type of account.
This isn't about being obsessive with your finances. It's just about being aware.
Compare today's top high-yield savings account and see how much more you can earn.
How much should you keep in checking?
There's no magic number that works for everyone. But as a general rule, I recommend keeping no more than one month of living expenses in your checking account.
For my family, that's roughly $5,000 to $10,000 depending on the month. It covers:
Rent and house stuffUpcoming bills and subscriptionsEveryday spending and groceriesCredit card balances I pay off each month
That's it. The checking account is basically a hub -- money flows in from my paycheck, and then flows back out to cover life.
It's not a savings vehicle or backup plan. It's just a working account.
If your checking balance regularly climbs well above your monthly expenses, that's a signal to move some of it.
The "bucketing" system I actually use
I think about my money in three buckets. It keeps things simple and makes sure every dollar has a job.
Bucket 1 -- Checking account:
In my checking I keep one month of living expenses. This is my account for daily banking activity. Paychecks land here, bills get paid here, and I keep it as lean as I responsibly can.
Bucket 2 -- Emergency fund and short-term savings:
I keep three to four months of expenses in my high-yield savings account -- usually somewhere between $15,000 and $25,000. This is my "solve a problem fast" money that I can go grab at any time if an emergency pops up.
While it's sitting there, it's earning the absolute most interest possible. (Fun fact, I've earned over $2,000 in interest just the last couple years alone!)
Bucket 3 -- Long-term investments:
All my other money is invested for the long haul. I have many accounts for investing, including Roth IRAs, brokerage accounts, and even some real estate projects. The point of this bucket is basically all the money I won't touch for years or decades. This is where the real wealth-building happens.
My overall money plan is pretty simple: every dollar should be in the bucket that makes the most sense for its purpose.
The bottom line
The answer is simpler than you'd think: There's no real need to keep more than one month of living expenses in your everyday checking account.
Anything less than that and you run the risk of not covering bills. Anything excessive means that money isn't working as hard as it could be for you.
If you don't have a high-yield savings account right now, this is your next financial to-do move. Compare the best high-yield savings accounts and start putting your cash to work today.
