Is $10,000 Too Much to Keep in a Checking Account?

Checking accounts are excellent financial tools -- that's why most American households have one. A solid checking account offers easy access to your money, an easy-to-manage online and mobile platform, and (ideally) no monthly fees. 

On the other hand, even the best checking accounts pay relatively little interest compared with high-yield savings accounts, so it isn't a smart financial decision to keep too much money in your checking account.

The average household keeps $16,891 in their checking accounts, according to the latest edition of the Federal Reserve's Survey of Consumer Finances. However, this is skewed by a small percentage of large-balance households. The median household checking account balance -- meaning that half have more and half have less -- is $2,800.

With all of that in mind, is $10,000 too much money to keep in your checking account?

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Like most personal finance questions, there isn't a perfect one-size-fits-all answer. Here's how to determine if you have too much in yours.

How much money should you keep in your checking account?

The general purpose of keeping money in a checking account is so you don't have to worry about paying your bills and day-to-day expenses. You certainly don't want recurring payments to be rejected, for checks to be returned, or to overdraft your account.

On the other hand, the goal is to find a balance between keeping enough cushion in your checking account and maximizing the higher-interest nature of your savings account.

Many financial advisors (myself included) suggest keeping between one and two months' worth of living expenses in your checking account.

A good way to total your monthly expenses is to look at your last few checking account statements -- specifically at the amount of money that flowed out of the account each month. As an example, if an average of $4,000 comes out of your checking account each month, maintaining a balance between $4,000 and $8,000 is reasonable. Keeping $10,000 in your checking account might be a little too much in your situation.  

Do you have too much in your checking account? Click here for our up-to-date list of the best high-yield savings accounts.

Factors to consider

Of course, for many people, the peace of mind that comes with having a lot of money in checking is worth more than the interest you would earn by transferring some to savings. And if having more in checking helps you sleep well at night, there's nothing wrong with that.

One reason people tend to keep too much in their checking accounts is that they're worried they are going to need it quickly at some point. If this applies to you, it could be smart to consider getting a checking account and high-yield savings account with the same bank. It's easier to maintain a relatively low checking account balance if you can easily transfer money from one account to the other with a click of a button.

The bottom line is that $10,000 in a checking account could be too much for some people, just right for many, and not nearly enough for others. It depends on your income, expenses, and overall financial situation.