The Surprising Truth About Average Checking Account Balances
When it comes to managing your finances, having a cushion of liquid cash in your checking account is crucial. It ensures you have enough money to cover bills and unexpected expenses without incurring overdraft fees. But how much should you aim to keep in your checking account? The answer varies depending on several factors, including age, income, and education level.
A Closer Look at Average Transaction Account Balances
According to the Federal Reserve’s Survey of Consumer Finances, the average transaction account balance (which includes checking accounts, savings accounts, and more) stood at $62,410 in 2022. Meanwhile, the median balance was $8,000. While these numbers don’t specifically drill down to average checking account balances, they provide valuable insight into how much cash families have readily available.
Age: A Key Factor in Transaction Account Balances
The survey data reveals a positive correlation between the age of the family’s “reference person” and their transaction account balance. For instance, families with a reference person under 35 had an average balance of $20,540, while those with a reference person aged 75 or older had an average balance of $82,800. The highest average balance, $100,250, belonged to families with a reference person aged 65 to 74.
Income: A Significant Influencer of Transaction Account Balances
Not surprisingly, transaction account balances also vary significantly by income. Families in the 90th to 100th percentile of income had an average balance of $353,030, while those below the 20th percentile had an average balance of $7,860.
Education Level: A Major Determinant of Transaction Account Balances
The survey data shows that the more education the reference person has, the higher the family’s transaction account balance. For example, families with some college education had an average balance of $33,410, while those with a college degree had an average balance of $116,010 – more than three times as much.
Growing Your Transaction Account Balance: Tips and Strategies
Regardless of your current balance, focusing on growing it can provide extra comfort and flexibility. Here are some tips to boost your checking account or other transaction account balances:
- Avoid Bank Fees: Switch to a bank that offers fee-free accounts or negotiate with your current bank to waive fees.
- Earn Competitive Interest: Consider high-yield savings accounts or interest-bearing checking accounts to increase your balance over time.
- Mindful Spending: Keep a budget to track and plan your spending, ensuring you’re saving enough to reach your goals.
- Increase Your Income: Negotiate a raise, apply for a higher-paying job, or take on a side hustle to boost your account balances.
Remember, maintaining a healthy checking account balance is just one component of a solid financial plan. Don’t neglect other account types, such as retirement and investment accounts, and prioritize saving and earning interest on your cash.
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