3 Reasons You Need A Buffer In Your Checking Account

Hello! Please enjoy this blog post from a friend of mine. We have a buffer in our checking account and it gives us major peace of mind. Do you have a buffer? About a month ago, I discovered we had quite a decent buffer in our checking account. It has always been a lofty goal…

Michelle Schroeder-Gardner

Last Updated: May 27, 2023

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3 Reasons You Need A Buffer In Your Checking AccountHello! Please enjoy this blog post from a friend of mine. We have a buffer in our checking account and it gives us major peace of mind. Do you have a buffer?

About a month ago, I discovered we had quite a decent buffer in our checking account. It has always been a lofty goal of mine to get one month ahead in our main household account.

I figured squirreling away a little here and there would contribute to the effort, but I never really took the time to look at how much we had in the account at the beginning of every month.

After a quick budget review, I saw we had a $1,600 surplus in our account! I knew I was squirreling, but I didn’t know I had all of those nuts set to the side. I was just leaving a little in the account at a time, but it’s obvious little unnoticed funds left here and there add up to a substantial amount.  

I don’t plan to stop at the $1,600 mark though because it’s not anywhere near a month’s worth of income, but it’s definitely a start.

I’ll continue doing what I’ve been doing — add the money and ignore it.

Hopefully, within another year we’ll reach our goal of being a month ahead in our checking account. There are several reasons I can rattle off about why everyone should have a buffer in their checking account, but I’ll just share a few.

 

A buffer account can protect you from bad days.

Everyone has bad days.  

They come when you’re least expecting them and they can cause serious setbacks when it comes to reaching your goals.  It’s Monday morning, you’re already late for work and you have a flat tire on the freeway and you have no spare. Of course, you neglected to sign up for AAA and the tow truck is going to set you back $150.  

Once you get your car to where it needs to be, the mechanic informs you it’s going to cost another $200 just to get a new tire put on. He also lets you know that your other tire is treading near the danger zone and it’s probably due to that alignment you need.  See how easy it is to have an unexpected $500 expense on a bad day?

What about an unexpected visit to the emergency room?  Most ER visits cost at least $100 with insurance.  After visiting the ER, you’ll probably need some prescribed medication.  This doesn’t include the day you missed from work because you were waiting at the hospital all day.

You may also simply overlook an upcoming expense. Your magazine subscription may be set for automatic withdrawal every three months and you forgot about the expense when you overspent at the grocery store last week.  You figured you would be safe until your next paycheck, but the magazine subscription withdraws and gives you a negative balance.

 

Negative checking account balances could cause an overdraft.

Eighteen percent of Americans have overdrawn their account within the last year.  In 2014, the average overdraft fee was $30 and these overdraft fees can have a domino effect.  One purchase could lead to multiple overdraft fees if several expenses go in at the same time.

There were many times when I incurred multiple $35.00 overdraft fees.  Fortunately, this is a distant memory. A $1,600 buffer in the account protects you from these unnecessary fees.

Of course, you can sign up for overdraft protection, but this type of protection doesn’t come cheap.  Banks still charge something for this type of service and if your credit card account is linked to your checking account, it could borrow against the balance on your card.

Personally, I declined overdraft protection on my account.  In the event purchases are made and money isn’t in the account, the bank will decline the purchase.  Many individuals may not even know they can decline overdraft protection, and they pay for it every time the spend beyond their means.

 

A buffer could help you get a month ahead of your bills.

Wouldn’t it be nice if you could pay all of your current month’s bills from last month’s income?  All the money you’re earning this month would be used to pay next month’s expenses.  You would have an emergency fund built right into your checking account.  

If things went wrong and you lost your job, you would already have next month’s expenses in your account!  You wouldn’t even have to touch your actual emergency fund for a whole month. This may not excite many, but it surely excites me!

Being a month ahead gives you great peace of mind.  According to a recent survey, a third of Americans earning $75,000 are living paycheck to paycheck.  With a buffer in your checking account, this wouldn’t be you!  You would be caught up with your bills and would currently be earning income that goes towards future expenses.  

Extra money in your checking account brings peace of mind.  It will be easy to set things up for auto-pay because you won’t have to guess whether you will be able to make the mortgage on the first.  When your insurance payment is due, the money will already be in the account.  

If you’re currently living paycheck to paycheck, do what I did.  Put a little to the side every paycheck.  Use unexpected windfalls of cash and sock away an extra $50 or $100 every single time.  Don’t slack up and you’ll eventually notice a healthier checking account balance.  

Don’t worry about the money being put to better use in a savings account.  Yes, you could earn an additional $1 or $2 of interest if the money were in a savings account.  You could also continue to overdraft your account every month and pay a $35 fee each time. The choice is yours.

Bottom line, If there is a cushion in your account, you are protecting yourself and building a strong financial foundation. A cushion gives you flexibility in your budget for any unexpected expenses and prevents bad days from becoming bad weeks.

You may not need a $1,600 buffer, but any bit of cushion would be better than none.

Do you have a checking account buffer?  If so, share your tactics for building a buffer with the rest of us.

 

Author bio: Latoya is a freelance writer for hire who loves talking about budgets and money.  Her mission includes paying off $79,000 in student loans and living to tell about it.  She’s a full-time, work-at-home mama who shares her journey over at Life And A Budget.  Connect with her on Twitter and Facebook.


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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. Michael Belk

    I know how important it is to have a buffer, but I am paying off diet and my buffer has been a little low. I am going to decrease my debt payments until I get some extra cash in my account.

    1. Sounds like a plan! Thanks for reading!

  2. I used to hold way too large of a buffer but have been slowly working it back down. I still like to keep $1-1.5k now that we are a one income home. It just helps with timing of payments vs pay day. I hate running my checking account too low so I think I will always keep some buffer in there.

    1. Same here, Thias. It can be nerve wrecking worrying about whether enough is in the account to cover monthly bills. Just makes sense to me to have a month’s expenses already there.

  3. I don’t really keep a buffer in my checking account because of the way we budget. If I had extra money in there, I might be tempted to spend it! We only keep enough money in checking to pay for that month’s bills.

    1. Hehe! Holly, I can certainly understand the temptation. Don’t think I haven’t dipped into ours on occasion:)

  4. Thanks for reading!

  5. I pretty much budget that every expense will be the maximum level and keep an amount to cover that. Of course the expenses don’t ever roll that way, so we have a natural buffer!

    1. That’s awesome!

  6. Amy @ DebtGal

    I think this all makes good sense, but I consider my emergency fund my buffer. I use a credit card, not a debit card, so I’ve never gone into overdraft. And since I can electronically transfer funds from my (interest-bearing) emergency fund account very quickly, I’d rather have my buffer earning those few dollars of interest. Every little bit helps, right? ๐Ÿ™‚ I also use a spreadsheet to track my checking account balance, so I always know exactly how much is in there, even taking future payments into account.

    1. Hmmm Amy, I’ve never even considered the credit card angle. That is a very convenient way of doing it and you’re right those overdraft fees would be out of mind if you use a credit card. Some might not have the discipline to pay their cards off in full each month or their completely anti-credit card, so a buffer would more likely work in their favor. And you’re right, those few extra dollars do help. I keep my ER fund in an online banking account. It takes a few days to get there so in the event of having a really big emergency, using the buffer in my checking account wouldn’t set us back as long as it’s not more than the buffer. Then once I get home I can transfer the money back from the ER fund (that’s only if I’ve spent money that is categorized as a true emergency). Thanks for sharing your thoughts, it definitely gets the juices flowing about other possible ways to handle unexpected mishaps.

  7. Jennifer

    Thanks. never heard the term buffer used in terms like this. Emergency fund, savings, yea. Learned something.

    1. That’s awesome, Jennifer. Yes, definitely keep it in mind for your future financial plans. It’s a great asset.

  8. You’re welcome! And yes, certainly keep putting those few dollars to the side. You’ll be amazed at how fat your account looks after months of discipline.

  9. Haha, sure does. And with that buffer in your account you can take those lemons and make you some lemonade! Thanks for reading, Jaime!

  10. I agree but at the same time, people who are bad with self control might be tempted to use it all on one bad moment, such as seeing a furniture that looks very good! I work two jobs, the one that pays me the least I let it all go to one account and didn’t touch it and the higher paying one is to used for all bill payment. Recently I moved all my money from the other checking account (where I used to keep my minimum pay wage) to a discover savings account. The interest is .9% and also it let me transfer to my checking account instantly (only allowed to do 6 each month) I like using the checking account as well because it offers me 10 cents for every time I use my card. I personally very satisfied with this situation however it seemed like I saved a lot more on previous way as transferring would require for me to wait and stuff.

  11. Saila,

    You are right, this method would require a great deal of self control. I have faltered a few times as well, but never on anything lavish. It was for unexpected needs…our son outgrew his baby carrier a lot sooner than expected so we had to dip into our buffer to purchase a car seat. I made sure it was the best car seat I could find at a reasonable price, nothing extraordinary that would set us back. Self control is a game changer and can help your finances in the long run. If one doesn’t have self control, it would be best to keep this money in a separate savings account; however, one that you could have immediate access to in the event that something unexpected happens and you need money quickly.

  12. We keep $1000 buffer just in case of bad day events like you mentioned. We have a larger emergency fund at a different bank earning a bit of interest, but transferring that money takes a few days. So I guess it’s like a buffer/mini emergency fund. And it definitely gives us peace of mind!

    1. I know it does, and yeah, it is like a mini emergency fund:)

  13. Barrie

    We’ve always had a buffer in our checking account. One never knows if an emergency may come up!

    1. You’re right, Barrie. You never know! Thanks for reading.

  14. We don’t have a buffer, but we are working on emergency savings. If money just sits in a checking account, it won’t stay there long. We have to have it in an account we don’t use daily for it to work for us.

    1. It’s good to know your weaknesses b/c trying to implement everyone else’s plans may work against you.

  15. Ree Klein

    Great article! I keep an extra $500 in my personal checking account that is a line item in Quicken. I use a TEMPHLD marker where you would usually put the check number in your register and periodically change the date so it’s where I see it.

    I also have a TEMPHLD line item for the charges I accrue on my American Express card. I adjust the amount I’m holding to reflect all of the outstanding charges. That way I know I can pay the bill in full each month.

    I’ve done this for years and it has worked like a charm!

    1. That’s awesome, Ree. Sounds like a great system you have working for you!

  16. I remember the days of $35 fee stacking. We’d go $5 over and bam! here comes $200 worth of fees. Those days are thankfully long gone. Up until last year, I would keep around $300 buffer in the bill paying account. Since that account is purpose driven and I knew every penny going in or out it was never a problem. We had also declined overdraught on all of our checking account (bill pay and personal) and have never been happier. Now we use a rewards credit card for most of the monthly spend cycle and pay the balance each month. The only payments coming out of the checking account go to that card and a few utilities/services that are still in the 20th century.

    1. That’s awesome, if only I had the discipline to use credit cards for all of my expenses. I’m sure we’d have some nice rewards to come from it…

  17. fehmeen

    A buffer of over $1,000 is pretty impressive!! It’s amazing how a little effort over time can add up to such a big gain. I do have one question thought – how do you make sure you leave the buffer as it is (or add to it) and not use that money for seemingly important personal expenses? Of course, you now have more leeway when it comes to living within your means…

    1. Fehmeen, I simply subtract our month’s expenses at the beginning of the month from the balance that’s in our account. That gives me a rough estimation of how large our buffer is. Anytime it’s creeping around $500 I know that it’s too low for comfort. I always want to see around the $1,000 mark. Also some expenses that come out of our household account don’t come out on a monthly basis or we don’t have a need for certain budgeted expenses for the month. For example, my son is drinking less baby formula now and we were under budget for that category amount last month. Instead of spending the money, I just leave it.That helps us accumulate at a fast rate as well.

  18. You’re welcome, Rachel. Glad you enjoyed!

  19. Sylvia @ Professional Girl on the Go

    This is such a great idea! I never thought about having a buffer in my account. I am currently focused on building my emergency fund. But once I hit the goal amount for that, I might just work on building a buffer because you just never know what will happen.

    1. Hi Sylvia, I say go for it. Every little bit saved always helps on those rainy days. Just think of it as having one umbrella in the car and one in the house. You never know where you’ll be when the downpour comes:)

  20. I pay off any current bills every payday. After the bills are paid I transfer all but $200 from my checking to my savings account. So I guess you could say I keep a $200 buffer in my checking account. That doesn’t seem like much, but I pay for most things with my credit cards. I’m trying to build up my points! The credit cards are paid off every payday so the balance doesn’t get too large.

    1. Hi Linda, any amount – large or small helps. Great job with that credit card. If we all had that discipline, what better shape we would be in!

  21. I have about several months worth of cash socked away in my checking account … having a buffer makes all the difference in the world in terms of comfort!

    1. Hi Jeremy! It sure does! Thanks for reading.

  22. Hi Elise, that’s very wise of her! Thanks for reading today:)

  23. We have created a buffer by ‘hiding’ $100 a month in our checking account. We are up to $1700 but it doesn’t show in the register. The hubs tires desperately need to be replaced so we are glad we have this!

    1. Jayleen, that’s an incredible amount to sock away. It makes a difference and you will be glad to have it!

  24. This is a great post. My family has a buffer of around $3,000 on our checking account, which is separate from our emergency funds.

    It’s good to have a buffer just in case you forget to pay something or if something is automatically taken out from your account.

    1. Very true, Allan! Thanks for reading!

  25. Aurora Licht

    Thanks for sharing this article. We all need a buffer and to be organized. Putting a little aside is the way to go. Staying on top of expenses, paying down debt is a good feeling.

  26. Allie

    I too try to keep a buffer, currently we are only about $500 over but it’s a start for sure. I like the goal of having double of what you’d need for the month, going to plan for that!

  27. So true. People like to play with fire in terms of their finances. Not only should one have a buffer in their checking account, but they should also have a buffer in saving in case of emergencies, such as losing their job for several months.

  28. We always have a buffer in our checking account. In the past I had not done this and overdraft fees killed me ๐Ÿ™ Never again. This an no credit card debt are the keys to a free and happy life ๐Ÿ˜‰ I learned that some time ago. Thanks for your article.

  29. Great post. It’s always been my temptation that if there’s leftover money in my account, that money is screaming out to be spent. I’ve never been much for building a buffer or a cushion, until this last year. I tried saving a little here and there during January, and when my car unexpectedly died last week, I was able to take care of it. This is great advice for anyone in any financial situation. Thanks for sharing!

  30. I definitely agree! You never know what may come up.

  31. Totally agreed. When I graduated university I begin saving 10% of my income, which is not much in Thailand! Fortunately that has added up over the years and has really helped in variety of situations. Even if you can only save $10 here or there, do it. As the author notes, it adds up and not only is helpful but also gives a welcome peace of mind.

  32. Having a buffer certainly helps. Rather than keeping it in your checking account, which earns 0 interest, I would keep it your savings account. You can withdraw from a savings account just as fast. You won’t earn much (~.25%) but still better than $0 for the same effect.

  33. I don’t keep a ton of extra money in the checking account – maybe a couple hundred. We have 4 different savings accounts that are tied to the checking so we can transfer money if needed immediately, no delay whatsoever. We have a savings account for vacation, one for car repairs, one for a down payment on a house, and one for any other emergencies that may pop up. We figured out a formula for how much money goes into each account each month, and it’s better this way to so they can earn a tiny bit of interest. Plus too by keeping it in savings, it keeps it away and it is less tempting to spend. Thanks for sharing!

  34. Lindsey

    We REALLY need to have a buffer in our account. Last month we stopped using our credit cards and ended up having to pay a late fee on our rent because we didn’t have money in our checking account since the BF’s paycheck posted late. :/.We REALLY need a cushion of some sort in our checking account