Your “Fat” Checking Account: How Money Hang-Ups Could be Costing You
Who doesn’t love logging into their checking account and seeing that there’s actually a sizeable amount of money in it? Heck, I sure remember the first time all of my bills were paid and there was still a comma in my balance total. Having such an experience after working hard to budget and save money can feel like a huge accomplishment — and it is! However, at a certain point, it may be time to let go of the comfort you feel watching your checking account grow and, instead, move your money to somewhere more lucrative.
This is actually something I talked about a few months ago when I suggested some different options for earning on your extra money. Still, as it turns out, the psychological power of having a “fat” checking account is stronger than I realized. Not only have I consistently had to remind myself to move money to my online savings account but my wife also admitted that she’s repeatedly run into the same issue. So what can be done about combatting this mental hang up?
First of all, having a built-in buffer in your checking account is definitely a smart thing. The problem is that the size of the buffer you’re giving yourself may be too large. Personally, I feel like having a few hundred dollars on-hand in addition to whatever you’ll need for bills and other expenses is about right. That said, you will want to watch out for any minimum daily balance fees your bank might charge and make sure you’re meeting those (sidenote: you might also want to shop around for a new bank if that’s the case). From there, the rest of the funds you have beyond your buffer can be transferred to a savings account or perhaps even put into a CD to help you earn on your money.
As I mentioned, I’ve been stashing my cash in an online savings account, which currently boasts a 1.65% APY. Additionally, all of my savings are still accessible at any time, although it may take a few days for transfers to clear. A possible solution to this problem, however, is to also open an online checking account as well. This is the set up I have, enabling me to instantly transfer money from my online savings to online checking and then take cash out of an ATM or write a check.
Finally, another tip I have for overcoming the mental roadblocks keeping your checking account fat is to utilize apps like Mint or Clarity Money. Why? Both of these top financial apps allow you to view your combined total for multiple bank accounts. As a result, you can easily watch your savings grow while paying less attention to your checking account itself.
While getting your finances in order and growing your savings are achievements that should be commended, the next step is to put your cash to work. If mental hang-ups are preventing you from moving money and making your checking account fat, hopefully these tips can help you overcome such a powerful effect.