It’s happened to all of us. We spend more than we anticipate, a hacker steals our card info, even a mistake at the bank can lead to overdrafts. Just the other day a mistake at a local bank caused the accounts of several personal friends to appear overdrawn due to an accidental double-posting of charges.
Keeping a financial cushion in your checking account can help immensely. It can not only help prevent overdraft fees (without paying for another service), it can give you needed funds while you sort out the issue.
I keep a minimum of $500 in my checking account for this purpose. I never allow my balance to go below this amount. That way, if I ever do make a mistake while budgeting I know that I won’t have to pay outrageous overdraft fees. I call this my pillow since it cushions me if I fall.
It isn’t always easy to build up a financial cushion, especially when you don’t make a lot of money. I limit how much I spend each month so that I have a little left over to add to my padding. In time I plan to build my cushion to $1,000, the amount I kept in reserve for years but since times were lean a few years back I am still working towards that goal.
It may sound insane to some of you. You may be thinking “How can I save $500? I can barely pay my bills as it is!” but I promise you that it is possible. You may not be able to eat out as much or splurge on those little extras but you can do this. If I can build up $500 while earning minimum wage at a part-time job then you can do it no matter what your story may be.
More importantly, you should. My local bank charges almost $40 in overdraft fees per charge; a single mistake can cost you hundreds of dollars in fees if you use your bank card routinely.
I learned this lesson the hard way. Several years ago an attorney I hired cashed their check a week earlier than agreed. While there was enough in the account to cover it my balance was wiped out. I ended up owing over $250 in overdraft fees alone, on top of my other charges (which my bank thankfully paid). It took a while to climb out of that hole.
Ever since then I have insisted upon keeping a pillow of cash in my checking account on top of my regular savings. I refuse to be that stupid ever again.
How much of a cushion do you keep in your bank account? Please share your stories in the comments below.
4 thoughts on “A Pillow for your Bank Account”
One of the (many) things I admire about you is that you don’t rant about things. So many people I know would go on and on about the evil bankers. You, on the other hand, experience a problem and search for a logical work-around. Every. Time.
It is a good example for all of us.
I’ve had my share of rants. In fact, you might see some crop up in the future. The thing is, it doesn’t benefit anyone if I just rant without coming up with a solution to the issue. Since I started writing in order to help people, I work hard to figure out a better way in order to share it with others.
I agree with keeping a cushion of money in the bank. I also keep a large bill(the largest I can) tucked away in my wallet for those unexpected expenses that come up from time to time. If I have to spend that big bill, I replace it as soon as possible. During the really tough years, having that bill in my wallet really helped me through some hard times. If you are in a bad relationship keeping money in an account with just your name may also be a good idea. My ex wiped out my savings several times before I got smart. Thanks, Annie, for another great article.
It does help, knowing that you’ve got some money stashed away for emergencies, doesn’t it, Karen? Sometimes when I have a down moment I will take myself window shopping on my little stash. While I never spend it, just knowing that I could buy this or that really helps to improve my mood and reinforce my decision to be frugal.
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