How much money should you keep in the bank?


If you have money (such as a pay check) directly deposited into a checking or savings account each month, there’s a possibility you have accumulated too much money in the bank. Although you need a certain amount of ‘cash on hand’ to finance everyday living expenses, excessive bank balances can mean lost interest income since checking and savings accounts typically earn next to nothing in interest. So, how much money is enough?

Factors to consider:

  • FDIC insurance: The Federal Deposit Insurance Corporation protects individuals against the loss of insured deposits. The standard deposit insurance amount of $250,000 per depositor typically covers traditional bank deposit accounts, such as checking and savings, money market accounts and certificates of deposit. Funds exceeding this amount are at risk if your bank were to fail.
  • Monthly spending: If you don’t know how much you spend each month, it’s a good idea to begin tracking your spending. Take a look at your credit card bills, payments deducted from your checking account and cash withdrawals.
  • Rainy day funds: In addition to covering your typical expenses, make sure you’re prepared for a financial emergency, such as the urgent need to replace your furnace in the middle of the winter, job loss or other situation resulting in the need for quick cash. A standard rule of thumb is to have six months of living expenses readily available in a liquid account.

If your balance exceeds FDIC insurance coverage, your monthly expenses plus an emergency fund, it may be time to move money into your investment account. Your Luma Wealth advisor can help you review your budget, cash flow and savings needs for a strategy that keeps your money working as hard for you as you do.


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