The age old question of whether you should buffer you checking account is one many people ask? Honestly, I think you should have a buffer in a checking account. But how much?
A lot of people say they take their checking down to $0 or $5. Most people who do this, will pay their bills and take out the rest of their cash for “envelopes”. They follow a strict budget. I think it’s a great way to budget money, but I worry what if something happens? It would leave me a wreck everyday personally.
Then there are those who never budget, and thus leave a lot of surplus in their checking to cover most expenses. I think I fall into this category. While I do “budget”, I’ve found that a lot of unexpected expenses can crop up with life. Thus I usually try to keep $500 – $1000 surplus in my checking account.
Before I had an online Money Market Account with HSBC, I used to keep $5k, or one month of expenses in my account. The reason? I’ve had issues where a mortgage payment has gone missing, but I’ve still had to make a payment. What to do? Pay it again and track down the missing payment.
But what would happen if you did run your checking account down to zero? The answer have an emergency fund. But what if the EF is unavailable immediately? I am unsure. I guess this is why I’m ultra-conservative with regards to keeping such a large surplus in our checking account. I like the feeling of knowing I have money on hand.
How much do other’s keep as a buffer in the checking? Or if you don’t, why not?
17 responses so far ↓
1 savvy // Jul 3, 2008 at 3:40 pm
I only leave a small buffer (~$100) in my checking account. However, that account is linked to a ’slush fund’ savings account (separate from my e-fund). Therefore, I can transfer money instantaneously if need be.
2 LJK @ onthehomefront // Jul 3, 2008 at 3:47 pm
Our checking account is interesting. I try to operate on a 0-based budget, but some of our line items we let roll from month to month (like groceries and gas). That makes a buffer right there.
Also, we have a savings account with the same bank as our checking account. That savings account is used for more irregular spending items.
If absolutely necessary, we could take money from there while we wait 3-5days for a transfer from our HSBC e-fund.
3 LivingAlmostLarge // Jul 3, 2008 at 5:42 pm
I’ve found that transferring money from HSBC take about 5 days and it’s not instantaneous.
4 Moneymonk // Jul 3, 2008 at 6:24 pm
no more than a $100
5 Jim ~ mydebtblog.com // Jul 3, 2008 at 6:58 pm
I can let our checking account can get down to a few hundred before my guard comes up. There is something about having that padding to keep me sane. I’d like to try to set a mental buffer point of 1k that way I know I have quite a bit of room before actually hitting bottom. Sometimes we have months with more expenses and others there is plenty left over. Transferring funds is a pain especially if it isn’t savings. I can’t imagine what it would be like to rack up a bunch of overdraft charges letting the balance get so low.
6 Meg // Jul 3, 2008 at 6:59 pm
My husband and I keep about a grand in reserve in our checking account. It’s tempting to move the money into our savings account where it’d make more money — or put it towards our debt. In fact, I had made just that case to my husband.
I changed my mind shortly thereafter, though. Our mortgage is on automatic payment with our checking account and one month it was paid twice due to a screw up in the way it’s processed. It wasn’t our fault, but it still took a while to get things fixed. Fortunately, we had enough in the checking to cover it without incurring any bank fees — and without having to forgo paying any other bills.
7 Meg // Jul 3, 2008 at 9:32 pm
I have two checking accounts; the main one is for bills and fixed costs (incl savings) and the other (much smaller) one for discretionary spending.
I know how much is going and and coming out of the primary checking within about $10, but because of when my fixed expenses fall there’s rarely less than $100 in there.
As for the discretionary account, I try to keep it over $50 at all times just because I get nervous even if I know I haven’t made any debits or withdrawals recently. But having a real cushion in there doesn’t work: I’ll just spend it.
[This is Meg from The World of Wealth, not the one from the previous comment]
8 Angie // Jul 3, 2008 at 10:51 pm
I tend not to keep any buffer in my checking. By payday, I’m usually down to the last $20 bucks. My checking account is at the same bank as a savings account where we keep a couple thousand that can be transferred immediately, or overdrafted (in the case of a bank screw-up; I balance to the penny!) Even though it’s only getting a fraction of a percent interest, it’s better than the nothing earned on my checking acct., and I know not to “accidentally” spend it when I look at our checking account.
9 Ashley @ Wide Open Wallet // Jul 4, 2008 at 3:05 am
We keep a lot in our checking. Just the way we pay our bills, I doubt it ever gets below $2,000. I think if we had less than $1,000 in there I would start freaking out.
10 frugal zeitgeist // Jul 4, 2008 at 10:58 am
I have very little buffer in my primary checking/saving accounts. Having said that, my checking account is linked to my EF; I can either write a check from my EF or transfer money within two business days. Anything more immediate can generally be put on a credit card.
This system was tested when I had to buy a $1500 plane ticket for a next-day flight in March. I put it on a credit card, put in a transfer order from my EF to my checking account before the card closed, and everything was fine.
11 Kristy // Jul 5, 2008 at 9:52 am
We keep about $500 in the checking. But we have a savings account where we normally keep an extra $2,000 just in case we need it. I can always move money over.
13 Slinky // Jul 8, 2008 at 11:28 am
I spend/save/etc the money I made the month before down to the last cent. ie This month I spend the money I received in June. So I generally have at least a month of income in my checking. If an emergency comes up, I use that money and then transfer the money from my emergency fund. I also have a line of credit in case my checking gets overdrawn. If that reaches it’s limit, it pulls from savings (for non monthly expenses), but it shouldn’t ever reach that point. (I’m not sure what sort of emergency would result in me blowing through several thousand dollars in less than a week. (the longest it would take to transfer from emergency savings) I only get charged interest on the line of credit (cents if paid promptly) and would only get overdrawn and charged fees if going through all of the above resources. So I guess I technically have a buffer. If I didn’t have all of the above, I would keep one month’s expenses somewhere that is immediately accessible.
14 LivingAlmostLarge // Jul 9, 2008 at 5:07 pm
I get nervous when I think about how long it takes for me to transfer money from HSBC to BofA. It usually takes about 5 days. I also prefer to pay bills immediately so I just keep buffer so I can pay everything asap.
17 Karla (threadbndr) // Jul 14, 2008 at 4:54 pm
I keep $1000 buffer in the checkbook. Plus it’s linked at the credit union to my ‘front line’ efund of about two month’s expenses. After that is the main efund at ING.
I get nervous if the checkbook falls below that $1000 mark, because there have been two times (over the last 5 years) when our payroll download didn’t work correctly and we weren’t paid for a few days while the bank got it fixed. Not good.
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