How much cash is too much cash to be in savings?

Cash is great. But can you have too much? And what should you do with it? Let’s find out.

illustration of hand placing coin into slot

The main point: If you have too much cash in savings, you may be missing out on growth from stock or bond investments. Consider having cash in savings for short-term needs and putting the rest into investing accounts.

Facts about cash in savings:

  • Cash in savings is liquid, meaning it is easy to access when you need to withdraw it for spending.
  • Cash in savings is also low risk, meaning your money should not decrease in value like stocks if you stay with FDIC insurance limits.
  • But—cash in savings does not have the opportunity to grow compared to cash in stocks and bonds, especially when savings rates are not keeping up with inflation.

Finding a balance: To strike the right balance between cash and investments for different needs, consider the following:

  • Cash is a secure option for your emergency fund. Most experts recommend having three to six months of living expenses saved. Cash is the lowest-risk option but you can use a mix of bonds and stock too. Take a close look at your situation and save what feels right for you. After that, take a look at your extra cash.
  • Cash and investments can also be right for your short-term goals. Having cash in savings can be wise for short-term goals (we consider anything under 12 months short-term). But depending on how you’re defining short-term and your risk tolerance, you may consider putting some cash for shorter-term goals in bonds and stocks.
  • Investments can support your long-term goals. For most goals longer than 12 months, consider putting your cash into stock and bond investments. While investing involves more risk, stocks have had greater long-term gains historically than leaving your cash in savings.

We have options for you:

  • Open a Cash Reserve account if you’re looking for a secure way to save. It’s a high-yield cash account that helps grow your savings while offering FDIC insurance up to $2 million ($4 million for joint accounts) through our program banks.
  • Open an investing account for your long-term goals. We’ll help assess your risk tolerance, provide investment recommendations, and make it easy to access expert-built portfolios to get you closer to your goals.

Ready to start saving? Whether you have short-term or long-term plans, we’ve got you covered.

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