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Is it wise to have a lot of money sitting in the bank?

Saving money for those big things in life like the down payment on a house, education and retirement is incredibly important and can be difficult. It may take years of saving to accumulate the funds needed to take care of these things, and if you enjoy accessing an Everygame login then you will need to be extra disciplined.

At the same time, it is important to have an emergency fund for those times when something unexpected might happen.

Starting early and developing good habits of dealing with money and saving will put you in a more comfortable position and allow for more flexibility.

When you have put aside some savings to cover any emergency and are no longer subsisting on the weekly or monthly paycheck then your financial situation has become more stable and will allow you more flexibility.  However, you do still need to keep your eye on things and make sure you know what you are spending your money on.

Contrary to what you might automatically think, keeping a lot of savings, in the bank may not be such a financially smart thing to do.  In fact, it could actually be financially detrimental in the long term.

Obviously, it is important to have some cash in the bank that is easily accessible without having to pay fees to withdraw it if the need arises.  This is for most people where they keep their emergency fund and an emergency fund is definitely financially advisable.

Shirley Yang, vice president of Marcus by Goldman Sachs agrees. “When thinking about your overall savings, one should consider an emergency fund as a part of the mix.”

What is considered a good amount for an emergency fund and where should you keep it?

Most financial experts agree that an emergency fund should ideally consist of a six months’ living expenses, but of course this will depend on a person’s financial situation.

A certified financial planner, Lauren Anastasio, at SoFi agrees and says that 3 -6 months living expenses is recommended.   Considering your overall position in terms of your health, working environment and other issues that may impact your future will determine whether you should save more or less.

Anastasio says that “This money should be kept separate from your regular checking account to avoid accidental spending or the temptation to use funds for anything other than an emergency.”

The benefit of keeping this money in your regular bank account and not investing it is that you have easy access to it.

However, the money is not earning you interest and is probably losing value. To prevent the money from depreciating you should put the money in a savings account where it will earn some interest.  During the Corona pandemic and its impact on the economy, we did see interest rates go down but these are likely to go up again.

So, it is important to shop around and look at the interest rates offered by individual banks and then deposit your money where the interest rates are the highest.

How much money should be sitting in your checking account

Your checking account is where you pay for your daily living expenses.  It is likely the place where you deposit your paycheck.  This is entirely separate from your savings account.   Money that is sitting in your checking account is earning little, if any, interest.

Each person’s living expenses are different and therefore recommending a fixed figure to keep in your checking account is not really possible.  However, there are a number of things to consider when deciding how much money to have sitting there.

Stash Wealth, financial advisors say that between $2,000 and $3,000 is a good figure and should take care of most regular expenses.  This could also be a little on the high side.  Shirley Yang recommends that “|Consumers should determine their estimated monthly expenses and keep enough in their checking account to cover those expenses.  Any additional funds left- over, they should consider transferring to something that gets a higher-yield.”

Lauren Anastasio suggests that “a guideline that makes sense for your checking account is to keep the equivalent of one net paycheck.  This ensures the amount is right for everyone regardless of income level.”

If you are still unclear about the issue…

You need to make sure that you have in your checking account an amount of money that allows you to feel comfortable and confident that it will cover your living expenses, and perhaps to enjoy a few treats.

Once you’ve ascertained what that figure needs to be, you can move the surplus into a savings account.  Be aware that some banks do charge fees if your checking account falls below a certain level so it is important for you to keep your account above that threshold.

A word about investing

Any extra money that you have been able to save should be invested so that it can work for you.  Money that is actively working for you, and growing, will help you to feel more confident and reduce any pressure that you feel.  There are a multitude of ways to invest that money, be it in bonds or stocks or mutual funds.  Do some research, or speak with a certified financial advisor who can help you move in the direction of your financial goals.

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