How much money should you have in your savings account?

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Most banks offer a savings account automatically when you open a checking account. Unfortunately, most of us don't use that savings account as much as we feel we should, because there's rarely enough money left over at the end of the month to make it worthwhile. Even when we're feeling good about our spending habits or budget, the temptation to give ourselves a treat may mean that even less money makes it into the savings account.

But what is your savings account really for? Answering that question is an important first step, and almost anybody will have a different answer. Some of us use it to stash away bonuses, cash gifts and other unexpected windfalls, because we like the idea of earning more interest than we would keeping that money in our checking accounts. Some of us are dutiful, making small deposits or transfers to the account, because we know the holidays are on the way.

Depending on how much money you make and how much you spend, your savings account can be a valuable tool in learning about, and changing, the way you look at and spend money. Having such easy access to our account balances these days, it's very rewarding to see the amount of money in that account going up each time we make a deposit.

Generally, a savings account doesn't provide the interest of more long-term financial products, like CDs or mutual funds. In fact, a savings account is unique because it gives us instant access to our savings. That can be good or bad, but either way, you're paying for that access with the interest you're not earning.

If you look at your savings account as an emergency fund, you can use this instant access to your advantage. It's money that you can get to easily, for help when things don't work out so well or the unthinkable happens. Catastrophic accident or injury, illness or bereavement are all emergencies that require instant funds, as is unexpected unemployment. Knowing your money has been safe and earning interest, but it's still ready for you in case of emergency, provides peace of mind when you need it most. So how much money should you stow in your savings account? Read on to find out.