More than half of Gen Z and millennials have less than $500 in their checking accounts

According to the 1,000 respondents recently surveyed by GOBankingRates, more than half of both generations keep less than $500 in their checking accounts. 

That might sound like too little. But is it, really? Here’s what you need to know.

How Gen Z and millennials manage their checking accounts 

The GOBankingRates survey set out to determine just how millennials and Gen Zers manage their checking accounts. It divided these two broad categories of respondents into three subsets: young Gen Zers, older Gen Zers and younger millennials, and older millennials and the youngest Gen Xers.

Each group asked how much they keep in their checking accounts on a regular basis. Here’s how their responses break down:

$500 or less: 

• 26% of young Gen Z
• 24% of older Gen Z / young millennials
• 17% of older millennials

$100 or less:

• 34% of young Gen Z
• 40% of older Gen Z / young millennials
• 36% of older millennials

Another 12%–16% of each group keep up to $1,000 in checking, while 10%–11% keep up to $1,500. A small percentage of each maintains a checking account balance of $1,500–$2,000.

“At first glance, it’s somewhat surprising, but I think you have to remember that it’s not just financial literacy limiting savings habits, but the economic environment we have been in for over a year,” says Brandon Heckert, a certified financial planner and partner at FSM Wealth. “Gen Zers that are entering the workforce today are experiencing highly inflated costs for everything, so to see so little in checking is not a surprise.”

Another critical finding of the survey was that 20% of young Gen Zers don’t have a checking account at all. While this could also be due to economic challenges, these younger consumers may also be relying on other vehicles such as peer-to-peer payment and investing apps. 

“Growing up in the Venmo age means that the relationship Gen Z has with money is different than other generations,” says Michael Lisovetsky, founder of credit card and banking platform Zurp. “We’re seeing that play out in their habits.”

How much should you have saved in your checking account?

There’s no hard-and-fast rule for how much you should have in your checking account (if you have one at all), but experts say there are some general practices you can follow.

“My recommendation is that you have at least three months worth of living expenses in liquid cash reserves at all times to protect it against a potential lapse in employment or loss of income due to a short-term disability,” Heckert says.

While having more than this in your account might give you peace of mind, financial pros actually advise against it.

“The primary risk…is the loss of purchasing power,” Heckert says. “As money sits in an account that is not bearing any interest (or very little interest) and we have the price of goods increasing at record levels, you are losing value.”

Other options

Instead, consider putting extra savings where it can earn more, such as a high-yield savings account. Recent moves by the Federal Reserve have caused interest rates on savings accounts to rise lately. In fact, some are currently offering rates of 5% APY or higher.

You can also put your money in a certificate of deposit (CD), which offers a guaranteed return in exchange for keeping your money in the account until the maturity date (usually between a few months and a few years). 

“Nowadays, a consumer’s best bet is to store extra cash in a high yield savings account,” Lisovetsky says. “CDs are another great option, but consumers should be aware that you typically lose access to your money for some time.”

You can also explore money market accounts or even money market mutual funds, which is what Robert Reilly, a finance faculty member at the Providence College School of Business, currently recommends. “They offer rates substantially higher than bank savings accounts and CDs,” he says. Keep in mind, however, that even low-risk investments like money market funds can still lose money if the market is down.

How to choose the right checking account for you

A checking account is a good place to keep money for day-to-day spending. If you don’t have one, there are many options you can choose from. To be sure you’re getting the best checking account for your needs, compare accounts from several financial institutions before choosing who to go with.

When evaluating a bank’s checking account offerings, consider:

• Fees: The most important to watch out for in a checking account is hidden fees, according to Lisovetsky. “Things like overdraft fees and other fees make you feel nickel and dimed,” he says. Some accounts charge monthly service fees or fees for using checks or certain ATMs. Others may charge fees for falling below the minimum required balance. So look for an account that charges minimal fees—or ideally, none at all.
• Overdraft protection: Overdrafting your account can come with costly penalties. Find out what a bank’s overdraft policy is; some may offer a grace period or allow you to link a savings account that covers the transaction in the case of insufficient funds.
• Accessibility: Consider how easy it is to access your money. You should look at the bank’s ATM and branch network, as well as its online and mobile capabilities. Consider features like online bill pay, mobile check deposit, and budgeting tools, too. “Making sure the user interface of the online bank app is more important than ever,” Heckert says. “The ease of transferring money and tracking transactions for budgeting purposes is something to keep in mind when deciding on which bank to go with.”

The takeaway 

Millennials and Gen Zers may approach banking differently, but both generations need easily accessible cash just like any other consumer. If you’re in one of these cohorts and don’t have a good place to store money, consider opening a checking account or other alternative soon.