How to know if a checking account buffer is right for you

Does a safety net make you feel more secure or does it increase your chances of falling because you know it’s there to catch you?  That is what you need to consider when deciding whether or not you should have a checking account buffer.

A checking account buffer is an extra dollar amount your keep in your account at all times so that if you go over your budget or an unplanned extra expense comes along, you will have that extra money in your account to cover the expense.  It’s like a safety net for your checking account.

My husband and I each have our own checking accounts.  We don’t treat our finances separately, we simply each entered the marriage with our own accounts and never combined them, just added each other’s names to them so we each have access to everything.  We like to keep a $3,000 buffer in each of our accounts. For some that might seem like way too much, but we are safety net people. We like the security of knowing that we can have a $6,000 emergency come up and still not have to tap into our savings.  Not that it’s ever happened, but you never know.

The way it works is when we pay our monthly bills the end goal is to have at least a $3,000 balance in each of our 2 accounts.  So we will look at how much is currently in each account and decide which account to pay each bill from accordingly so that everything evens out.

A checking account buffer is like a safety net for your checking account. Click To Tweet

There are of course both pros and cons to having a checking account buffer.  It might work for some but not for others. Here is my list of pros and cons:

Pros

• It gives you peace of mind knowing that if something unexpected happens you have extra money to cover the cost
• It prevents you from pulling money out of your savings account whenever your checking account balance is low or about to go in the negative (you should really try to avoid touching your savings unless it’s a real emergency)
• If your bank requires a minimum balance in your checking account, having a buffer prevents your balance from falling short of the requirement (an event that would most certainly result in a bank fee).
• If you earn interest on your checking account balance each month, having a buffer means you’ll earn more interest since it’s based on a percentage of your balance.  

Cons

Okay, there’s only one big con! Having a checking account buffer might tempt you to spend more money because you know it’s there and easily accessible. You need to think about your behavior patterns and how likely you are to spend the extra cash.  You know yourself well enough to know if it would be too tempting and if you’d perhaps be better off having that money in your savings account instead.

How to create a checking account buffer

Please note that if you are currently paying off debt I do not recommend having a checking account buffer.  I recommend having only a $1,000 emergency savings account and any money you have left over at the end of the month should go toward your debt snowball.  

If you are debt free and decide that having a buffer would be beneficial to you, the first thing you need to do is decide on a dollar amount.  $500 to $1,000 would be a good place to start. Then when you have money leftover at the end of each month (which you always should if you’ve budgeted properly) instead of putting it into savings, just leave it in your checking account.  Do this each month until you’ve worked your way up to the dollar amount you decided on.

What to do if you dip into your buffer

The goal is to try not to use your buffer unless it’s absolutely necessary.  However, if something comes up and you do spend some of the money in your buffer, replenish it by making it a priority in your monthly budget.  Simply add it as a line item to next month’s budget for the dollar amount you would need in order to build it back up.  If it takes a couple of months to do this that’s okay. Just keep it as a line item in your monthly budget until your buffer is fully funded.

Now that you know all about checking account buffers this leads me back to my original question. Does a safety net make you feel more secure or does it increase your chances of falling because you know it’s there to catch you? The answer is… there is no right answer!  It completely depends on what type of person you are. So which type are you? Will you try giving yourself a buffer or do you already know that having one will tempt you to spend more money? Leave a comment and let me know!