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<ul class="summary-list">
 <li>
  Holding excessive funds in your checking account might result in losing potential interest and growth opportunities.
 </li>
 <li>
  Around two months' worth of living costs is the maximum amount to hold in a checking account.
 </li>
 <li>
  High-return savings accounts, certificates of deposit (CDs), and investment accounts are more advantageous for your money over the long term.
 </li>
</ul>
<p>
 Everybody enjoys spotting a substantial amount in their checking account — yet at what point does that sum become excessively large?
</p>
<p>
 Holding onto excessive things in your
 checking account
 Isn't optimal for these two reasons: Firstly, readily available funds may tempt you into spending them. Secondly, since checking accounts typically do not generate significant interest—or none at all—your cash won’t increase over time. Storing excessive amounts in your checking account might result in missing out on potential earnings, however small they may be.
</p>
<p>
 Financial advisor Marci Bair from
 Bair Financial Planning
 In San Diego suggests that for individuals with a consistent salary, she advises maintaining "roughly two months' worth of living costs" in their checking account at all times.
</p>
<p>
 If your checking account holds one or two months' worth of living costs and you think this amount may be excessive, consider these indicators. Should they resonate with your situation, it’s likely advisable to begin transferring funds elsewhere.
</p>
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</p>
<h2>
 1. There isn't a strategy in place for your savings.
</h2>
<p>
 If you lack a financial strategy, you might find yourself with cash idle in your checking account, ready for unforeseen expenses. This approach won’t help you accumulate wealth effectively.
</p>
<p>
 Rather than doing nothing, choose the amount you want to allocate towards each of your financial objectives, and establish automated transfers from your checking account to your savings, retirement, and investment accounts every month.
</p>
<p>
 A strategy can assist in turning your aspirations into real achievements, enabling you to set aside the necessary funds while allocating the remainder towards various objectives and substantial expansion possibilities.
</p>
<h2>
 2. You've already filled your emergency fund.
</h2>
<p>
 A clear indication that you have more than enough wealth begins with something positive: You've successfully assembled a complete set of assets.
 emergency fund
 , and you still have some funds remaining. An emergency reserve should consist of roughly six months’ worth of living costs kept in a secure yet accessible place, such as a
 high-yield savings account
 .
</p>
<p>
 Once this account is established, it might be tempting to keep any extra funds in your checking account. However, Bair suggests alternative approaches for utilizing the money. He recommends transferring the remainder into
 CDs
 "And then to a well-balanced investment portfolio," she explains.
</p>
<h2>
 3. You have overlooked other monetary objectives, such as planning for your retirement.
</h2>
<p>
 It’s one matter to overlook financial objectives when funds are scarce. However, it becomes quite different when you ignore those same goals even though you possess the means to work towards achieving them. If your savings and
 retirement accounts
 If they aren’t increasing, yet your checking account balance is going up, you might be facing an issue.
</p>
<p>
 If your checking account balance is increasing while your IRA,
 401(k)
 , or your savings account isn’t growing, you might be keeping an excessive amount of funds in your checking account. Thanks to
 compound interest
 Time is crucial when it comes to saving for retirement (and, indeed, any type of savings). If you possess funds available for saving, you should place them in an account where they can start benefiting you at the earliest opportunity.
</p>
<p>
 Think about arranging for automated transfers from your checking account or having money directly withdrawn from your salary to work towards your financial objectives.
</p>
<h2>
 4. You're letting chances slip away.
</h2>
<p>
 If you maintain a substantial balance in your checking account yet fail to utilize benefits such as your employer’s 401(k) matching contribution, you may be keeping excess funds idle. The match, which involves your company contributing an equal amount up to a specific percent, essentially amounts to free money. Redirecting those additional funds from your checking account into your retirement account could prove more beneficial for your future finances.
</p>
<p>
 Perhaps you haven't looked into another type of savings or investment account such as a Health Savings Account (HSA). This is a tax-advantaged account designed for qualifying health-related expenditures; funds can be carried forward annually and utilized later for additional retirement savings. If you have a high-deductible healthcare plan, you qualify for this option. Having extra cash in an HSA could contribute more effectively towards accumulating wealth compared to leaving it in your checking account.
</p>
<h2>
 5. You're concerned about losing potential earnings.
</h2>
<p>
 According to the FDIC, the typical checking account boasts an interest rate of 0.07%. This figure is significantly below what you'd usually find with a high-yield savings account.
</p>
<p>
 Moreover, this pale in significance when compared to the typical 10% yearly gain from the stock market, which implies that funds held in a retirement account or similar long-term investment vehicle might expand further. Opting to keep your money in a checking account may result in missed opportunities for greater accumulation. Should this situation make you uneasy, then it’s advisable to consider relocating those funds.
</p>
<p>
 Bair mentions, “I have customers who believe their balance in their checking account isn’t excessive,” but adds, “once these same individuals realize the minimal interest rates being offered versus potential earnings from higher-interest options, we typically encourage them to transfer funds accordingly.”
</p>
<p>
 <em>
  The article was initially released in March 2020.
 </em>
</p>
<div class="read-original">
 Read the initial article on
 Business Insider
</div>
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 Business Insider
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5 Signs You’re Wasting Money by Keeping Too Much in Your Checking Account

Unknown money, money management, personal finance, saving money, savings accounts

Locate a Competent Financial Adviser Finding a financial advisor It doesn’t have to be complicated. With SmartAsset’s free tool, you can quickly connect with up to three fee-only financial ad…