It never hurts to have a small cushion.
- My checking account pays minimal interest.
- Despite that, I like to keep it funded beyond what I need for short-term bills.
As a self-employed person with young children, a dog, and a house I’m responsible for, I’m what you might consider a bit financially paranoid. What that means is that I often worry about money, particularly unplanned bills, even though I do a pretty good job of saving and not spending my entire paycheck.
In fact, most people are advised to put together a emergency fund with enough money to pay three to six months of essential bills. The logic is that a sum like that could help someone get through a long spell of unemployment, or it could cover a big expense, like a surprise home repair.
However, I can and do like to keep more like a year’s worth of expenses in my savings account. While I don’t earn much interest on that cash, having it in savings gives me peace of mind.
But it’s not just my savings account that’s a bit overfunded. I also like to have a few thousand extra dollars in my pocket. check account. This is why.
A little cushion could go a long way
I don’t pay bills from my savings account. Rather, my various expenses, from my mortgage to my car insurance premiums to my credit card bills, to receiving payments from my checking account. My checking account is also the account I touch when I need to get cash at an ATM.
Normally, I am quite aware of what my monthly expenses are like. But sometimes, I may run into a situation where I have a lot of bills due in a short period of time, or I forget a single expense that is due. And for that reason, I like to have extra money in my checking account, in case I need to access a large amount of cash in a short time.
As an example, last month I had to pay for my son’s summer camp in full. It was many thousands of dollars. My daughters’ camp, by contrast, requires me to pay my tuition balance over six months, which is easier to manage from a cash flow perspective. If I didn’t have a few thousand dollars extra in my checking account, I could have found myself in a stressful situation when my son’s tuition was debited. While I there should be I remembered that the balance was due in February, naturally, I did not.
I also intend to increase my checking account because if there is one thing I hate to do it is lose money due to commissions. Many banks will allow you to overdraw your checking account, but will charge you for it in the form of overdraft fees. Having extra money in my checking account helps me avoid them.
tranquility is worth it
I happen to have a checking account that pays a small amount of interest, but it’s less interest than what I get on my savings account. Despite that, I still like to keep the practice of keeping an extra few thousand dollars in my checking account so they’re available when I need them. Doing so gives me more peace of mind, just as it comforts me knowing I have a good amount of cash in my emergency savings if I need it.
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