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Posted by Camille Cavicchio (MONEY FORUMS: 4, Answers: 0)
Asked on November 16, 2015 12:56 pm
I hardly keep anything in a savings account. That's because the interest rates b/w savings accounts and checking accounts are negligible nowadays. So why not keep your money more readily available? So the question now is about how much is too much to keep in checking. I think anything over 6 months' worth of expenses is excessive. Anything beyond that amount should be invested IMHO. For me personally, I only keep about 3 months' worth of expenses in checking. That's b/c I have a lot of income streams. If you only have 1, I'd keep 6!
I'm going to agree with Melanie again. I have about 4 months of living expenses for every member of my family, and I think that is just the right amount. I also have savings that are designated for travel or holiday spending. I set a goal for those, and when I hit the milestone, I stop putting money in that fund.
Once you've decided how much you need to have in your savings account emergency fund to cover 6-12 months of your living expenses, be sure to prioritize replenishing this account whenever unusual expenses come up that cause you to withdraw some of your emergency fund savings.
I agree with Melanie. If you have 6-12 months of living expenses in savings then I would put additional savings into a 401K or other investment.
I don't think there's "too much" you can have in savings. However, it could be too much if you have all of your money in savings and not investments. I think a safe amount is 12 months' of expenses in savings, and have the rest in investments.