How much money should you keep in the bank and what factors to take into account

Having money in the bank may seem like the safest and most convenient option, but it’s not always the smartest thing to do financially. Leaving large amounts accumulated unmoved can cause your money to lose value over time, especially in the face of inflation, and even generate unbeneficial spending habits.

In this article, we explain how much money you should actually keep in your bank account, why having too much can be harmful, and what mistakes to avoid so that your personal finances work in your favor.

1. The danger of inflation: your money loses value if it is not in motion

Inflation causes the real value of your money to decrease over time. For example, if you keep $1,000 in the bank and annual inflation is 5%, that money will buy fewer goods or services per year than before.

This is important because having too much money in an account that doesn’t generate real returns means that your purchasing power erodes year after year.

Conclusion: Having enough for your immediate expenses and a few months of security is fine, but keeping large amounts unprofitable doesn’t protect your money from inflation.

2. Your bank account isn’t the best “worker” for your money

A traditional checking or savings account does not usually generate significant returns. In many cases, the interest rates they offer are very low or even close to zero, especially compared to other investment or smart savings alternatives.

For this reason, money that stays in the account for too long often works less than you do: it doesn’t grow, devalues over time, and doesn’t contribute to your financial goals.

3. Comparing money: liquidity vs profitability

It is essential to distinguish between two concepts:

• Liquidity: money that you can use immediately for basic or unforeseen expenses.
• Profitability: money that is grown over time through investments or financial instruments.

While a bank account offers you liquidity, it does not always offer real returns. That’s why understanding how much money you need quickly and how much you can put to “work” is crucial.

4. Having more money available can lead to spending more

A common misconception is that if you have a lot of money available in your account, you’re automatically better off. But in practice, having immediate access to many funds can incentivize more spending, which reduces your ability to save and invest wisely.

That is why it is recommended to keep only what is necessary in the bank, and allocate the rest to specific goals or instruments that generate returns.

5. The false sense of success of seeing large figures in the account

Seeing a large figure in your balance can give a false sense of security or financial success. However, having money sitting still does not equate to having money that is well organized.

A sound financial strategy involves:

• Know how much you need for immediate and foreseeable expenses.
• Set aside a backup fund for emergencies.
• Direct the rest towards instruments that can overcome inflation and generate growth.

This approach is more effective than simply “hoarding money” in an account with no purpose.

6. What is an emergency fund and why should it not be too large?

An emergency fund is a reserve of money that allows you to face unforeseen events without getting into debt. Experts usually recommend that this fund covers between 3 and 6 months of your basic monthly expenses.

Why this amount?

• It gives you security in situations such as job loss, repairs or unexpected medical expenses.
• It does not require to be invested in high-risk instruments.
• Keeping more money than is needed for emergencies generally does not bring additional benefits, and can lead to real losses against inflation.

Once you have this basic fund, the surplus can be better used in investments, savings plans with higher returns or financial tools that allow you to grow.

7. Key factors in deciding how much money to keep in the bank

When deciding how much liquidity to have, consider:

• Your fixed monthly expenses: rent, fees, food, utilities.
• Personal job and financial stability.
• Possible unforeseen events and events that may require cash.
• Current interest rates and inflation.
• Short, medium and long-term financial objectives.

There is no universal number for everyone, but there is a structure: liquidity for immediate needs + adequate emergency fund + investments or instruments that protect or increase your capital.

Conclusion

Having money in the bank is important, but in the right measure and with a clear purpose. Saving large amounts without considering inflation, profitability, and your financial goals may be less intelligent than it seems.

Assess how much you need to live and cover emergencies, and then put the rest to work strategically. Learning how to balance liquidity and growth will allow you to protect your money and make it grow over time instead of seeing it lose value.

You can then follow the procedure in the following video from Júlia Marva’s channel:

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