Minimum Balance for account

[boyerbt]

I did a quick search but didn't see a post so here goes:

What is the minimum balance that you keep in your main checking account and how do you quantify how much you should keep as a minimum amount?

I currently have a minimum balance in my primary checking account at about $2k but can't decide if I should pull some (maybe as much as $1,500?) to help jump-start my IRA or add to other investments? I have recently paid off my student loans and therefore my savings has increased dramatically.

This $2k has always seemed like an extra safety net for me but I think that there are better options for the money.

Thoughts?

[KMMK]

Usually whatever it takes to get the monthly fee waived, which usually works out to 1-2 months expenses.
I like a 1 month buffer anyhow.

[skip207]

£20k however for no other reason than we have a "123" account here in the UK which offers 1.5% on balances of up to 20k.  Last year it was 3% which was even better, still on 20k.

If it was not for 123 account I would probably keep c.£5k in my normal account as this would cover 2 months outgoings.

 

[prognastat]

I'm assuming you are asking if an emergency fund makes sense and if so how much. The answer for this really would be, it depends.

For one if you have very few bills and expenses having a large amount in your checkings/savings makes little sense. If however you have a lot of bills then you might want the security in case you lose your source of income for an extended time. Due to this a lot of people will recommend you have 3-6 months of your expenses in a readily available place in case of emergencies and possible job loss. Due to differences in income/expenses this can vary a lot. Some might be comfortable on 3 months and don't have many expenses and get away with just a few thousand. Others go in to the tens of thousands.

Another option if you are comfortable with it that MMM himself has floated putting all your money in to investments and using a debt cushion. Have one or more credit cards that have a reasonable amount of credit available on them. Pay for the emergency with them. Then use the time before the interests hits to either cash flow the money or pull it out of investments that would have taken some time to withdraw from.

If you have any high interest debt though then an emergency fund makes no sense since you could pay it off, then if an emergency happens you would put it back on the credit card and be none the worse off while being way better off if an emergency doesn't happen.

[I'm a red panda]

We keep 40K (across 2 accounts) as that is the maximum for rewards checking, which earns US between 2 and 4% interest depending on the year. We doubled either account get below 20k, but move money out if it gets much higher too. This is the conservative part of our asset allocation.

We do not designate any sort of emergency fund.

[marty998]

http://forum.mrmoneymustache.com/ask-a-mustachian/am-i-crazy-for-only-having-$50-in-my-checking-account/

Thread discussion less than one week ago :)


Edit: sorry, can't seem to fix broken link...

[boyerbt]

http://forum.mrmoneymustache.com/ask-a-mustachian/am-i-crazy-for-only-having-$50-in-my-checking-account/

Thanks for the link - I have copied the corrected link above.

[momcpa]

to IOWAJES:   we do something similar.  A couple years ago I saw an ad for "Kasasa" accounts in our area (IL).  So I set up an account in my name and one in my husband's name so that we could max-out at the higher interest.  We do keep a sizable amount in the two accounts, but it's a guaranteed rate as long as we each meet the couple qualifications. (and we always do).  It's definitely our 'what if something happens' money, it's totally liquid,  and it's getting more interest than a CD.

[I'm a red panda]

The $50 discussion isn't exactly a duplicate thread (although of interest). I don't think the poster was looking for the person with the least amount of money in their checking account; but rather a discussion of what people keep in theirs.

For instance, I didn't post in that thread- because my checking balances are SO much higher it didn't make sense to.  But like momcpa said- I kind of treat mine like a CD. It's guaranteed (with relatively easy qualifications each month), and it's liquid.  I don't want to move it into an investment fund.

[prognastat]

Another question for yourself that helps lead you to an answer if you want an emergency fund of some sort is how far can you cut back your expenses if necessary.

If you currently have $2000 a month in expenses, many would say have 6-12k in an emergency fund. If however you know if you buckle down you can get by on $1000 a month then suddenly you only need 3-6k to cover 3-6 months of expenses.

Finally how reliable is your current job and how easy is it to get another job in your field. If your job is very reliable and you are unlikely to be let go and your field is one where you could easily get a new job within 1-2 months then only having only 3 months instead of 6 months can be completely reasonable.

[CheapScholar]

I'd be embarrassed to say how much cash I'm sitting on right now.  I'm so afraid of a massive correction or recession.  And it's not like I'm not putting cash into the market - I invest in Vanguard funds every month through my 403b to the tune of $2,280 (includes match).

[Ftao93]

I keep a few bones in Checking, the rest goes into Savings.  That just got to 10k after picking up a cheap car.   We're saving for a house, but that could be YEARS down the road, so I'm not sure what we should do.  Maybe crank up the tax-def. accounts

[Rubic]

I currently have a minimum balance in my primary checking account at about $2k but can't decide if I should pull some (maybe as much as $1,500?) to help jump-start my IRA or add to other investments? I have recently paid off my student loans and therefore my savings has increased dramatically.

Roth IRA?

If so, you can withdraw your original contributions from the IRA in the event of an
emergency. You could jump start your 2016 IRA contributions any time before
April 15th of this year, which would probably give you an opportunity to rebuild
your emergency fund before you even start your IRA account.  Or even consider
putting more than $1500 into your 2016 contribution.

If your 2016 Roth IRA contribution still constitutes your emergency fund in
April (or whenever you decide to jump start your IRA), you should keep it
in cash equivalents until you've rebuilt your ex-IRA emergency fund.  You don't
want short-term fluctuations in the market to endanger this source of capital.

Then start making IRA contributions for 2017 ;-)
 

[momcpa]

FYI   these are the terms of the local Kasasa account that we treat as our liquid emergency fund:

2.50% APY* on balances up to $25,000
0.25% APY* on portion of balance over $25,000*
0.03% APY* if qualifications aren't met
Nationwide ATM fee refunds, up to $30, per qualification cycle*

[JLee]

I like to stay around $5k.  I'm at about $2500 now after a few things (IRA, deposit on a new apt, etc) and it would be uncomfortable for me if that was a normal level.

[boyerbt]

The $50 discussion isn't exactly a duplicate thread (although of interest). I don't think the poster was looking for the person with the least amount of money in their checking account; but rather a discussion of what people keep in theirs.

For instance, I didn't post in that thread- because my checking balances are SO much higher it didn't make sense to.  But like momcpa said- I kind of treat mine like a CD. It's guaranteed (with relatively easy qualifications each month), and it's liquid.  I don't want to move it into an investment fund.

Correct, I wasn't trying to see who is the best at financial limbo but was curious if people have a ratio, factor, or hard number that they like to keep in their account.

Even while paying off my student loans over the last several years I still kept a decent amount in my checking as a simple emergency fund. But now that I am finished with the debt I am unsure how much I need to keep in the checking account while keeping myself sane. Before it was a necessity but now it is a security blanket. My job is fairly stable and I have roughly 3-4 months of expenses saved in my savings account but have an additional $2k+ in my checking...for what?

I currently have a minimum balance in my primary checking account at about $2k but can't decide if I should pull some (maybe as much as $1,500?) to help jump-start my IRA or add to other investments? I have recently paid off my student loans and therefore my savings has increased dramatically.

Roth IRA?

If so, you can withdraw your original contributions from the IRA in the event of an
emergency. You could jump start your 2016 IRA contributions any time before
April 15th of this year, which would probably give you an opportunity to rebuild
your emergency fund before you even start your IRA account.  Or even consider
putting more than $1500 into your 2016 contribution.

If your 2016 Roth IRA contribution still constitutes your emergency fund in
April (or whenever you decide to jump start your IRA), you should keep it
in cash equivalents until you've rebuilt your ex-IRA emergency fund.  You don't
want short-term fluctuations in the market to endanger this source of capital.

Then start making IRA contributions for 2017 ;-)

Yes, I would be planning on opening a Roth IRA and applying it towards 2016 so that I can fully fund 2017 as well.

[FIRE Artist]

I used to just keep about 2k max in my checking account, then I started using YNAB which talks about budgeting this month's expenses off of last month's pay checks, and stopping the credit card float cycle.  It also got me into the habit of accruing for all annual expenses month on month so that money builds up into my checking account too so my account balance now trends towards 7k. 

With my stash size, running out of money to pay the monthly bills is not at all a concern, but following YNAB certainly helped manage my cash flow through my checking account much better, and it also is allowing me to analyze my spending in a way I wasn't doing before, and makes the thought of FIRE less daunting as I have a better handle on my cash flow.

[Ebrat]

I like to keep at least $3k in mine, but it can dip into the $1k-2k range sometimes. I'd prefer keep a little more in there (like $5k-6k), but have other priorities right now.

If you don't feel like you need that much, I vote for putting as much as possible into your 2016 Roth.  You have other liquid savings, and you can take out the contributions if you need to.  And (most importantly in my book) once the opportunity to contribute for the year is gone, it's gone.

[prognastat]

The $50 discussion isn't exactly a duplicate thread (although of interest). I don't think the poster was looking for the person with the least amount of money in their checking account; but rather a discussion of what people keep in theirs.

For instance, I didn't post in that thread- because my checking balances are SO much higher it didn't make sense to.  But like momcpa said- I kind of treat mine like a CD. It's guaranteed (with relatively easy qualifications each month), and it's liquid.  I don't want to move it into an investment fund.

Correct, I wasn't trying to see who is the best at financial limbo but was curious if people have a ratio, factor, or hard number that they like to keep in their account.

Even while paying off my student loans over the last several years I still kept a decent amount in my checking as a simple emergency fund. But now that I am finished with the debt I am unsure how much I need to keep in the checking account while keeping myself sane. Before it was a necessity but now it is a security blanket. My job is fairly stable and I have roughly 3-4 months of expenses saved in my savings account but have an additional $2k+ in my checking...for what?

Oh that is on top of a regular emergency fund in your savings?

In that case just enough to cover your regular bills due until next paycheck.