How Much Money Should You Keep in Your Checking Account Versus Savings in Israel?

There is no universal amount of money that everyone should keep in their checking account versus transferring to savings, as individual circumstances vary. However, financial experts recommend maintaining enough funds in the checking account to cover one month of expenses, while setting aside an emergency fund equivalent to about four months of expenses in relatively liquid savings or deposits. The remaining funds can be invested for medium- to long-term growth.

Many people tend to keep excessive amounts in their checking accounts, which results in lost potential earnings due to low or zero interest and inflation erosion. For example, a family spending 20,000 shekels monthly might keep 25,000 to 30,000 shekels in their checking account, with the rest moved to savings. Holding 100,000 shekels in a low-risk deposit earning around 3% annually can yield about 3,000 shekels, which is lost if the money remains idle in a checking account.

While transferring all funds to fixed deposits or the stock market can pose liquidity and risk issues, alternatives like short-term government bonds (Makam) and money market funds offer relatively safe returns around 3.2% before taxes. Makam yields are taxed at 15% on nominal gains, while money market funds are taxed 25% on real gains after inflation, with management fees between 0.06% and 0.19%. Money market funds also provide daily liquidity, often outperforming fixed deposits.

The key is balancing liquidity, security, and returns. Keeping only the necessary amount for immediate expenses in the checking account, maintaining an emergency fund in liquid savings, and investing the rest prudently can optimize financial health. Ultimately, money left idle in checking accounts loses value over time due to inflation and missed interest opportunities.