You Need A Checking Account Buffer

I’ve read differing opinions about keeping a cushion in your bank account. Some people say they are very efficient budgeters and never need a buffer in their account. Others keep a month’s worth of expenses (or more!) in their checking account. I fall somewhere in the middle.

I believe everyone should keep a small buffer in their checking account. But why? And how much?

Human Error
I am usually an efficient budgeter. I am always prepared for the usual bills that need to be paid on a monthly basis. However, I am human and I make mistakes. For example, I may forget about the $25 I transferred out of my account to repay a friend for my share of a joint gift. The buffer is there for these one-offs, giving you peace of mind.

Not Too Much
Be mindful of how much of a buffer you keep in your account. I don’t think it’s necessary to keep a whole month’s worth of expenses in there as a cushion. That money can be better used elsewhere, whether in a savings or investment account.

Not Too Little
I like to keep enough in there so that I never have to worry about an overdraft fee. If I am making a big transfer, I typically remember to update my budget accordingly. It’s the little expenses that slip through the cracks. Figure out what your threshold is for triggering your “update-the-budget” reflex. I like to keep my cushion at around $500, and never less than $300. A few small transfers could add up to a couple hundred dollars easily. So, for me, $500 is the sweet spot of not too much and not too little.

Do you have a checking account buffer? If so, how much do you keep as a cushion?