Keeping extra money in your checking account might feel safe, but is it actually a smart move? If you’ve built up a decent cash cushion—say, around $12,000—you might think you’re making a responsible financial choice.
But here’s the catch: Your bank may tell you that’s too much to have sitting there. So, what should you do with that money? Let’s break it down and find out how to make your cash work for you!
How Much Should You Keep in Your Checking Account?
Your checking account is meant for everyday spending—groceries, bills, rent, and those unexpected expenses that life throws at you. But keeping too much in there could mean you’re missing out on better opportunities to grow your money.
A good rule of thumb? Keep enough to cover one to two months of expenses. For example, if your monthly bills add up to $2,500, aim to keep around $5,000 in your account. If you’re a freelancer or gig worker with unpredictable income, keeping a bit more as a buffer can be a smart move.
Holding too much cash in your checking account doesn’t just keep your money stagnant—it can also cost you in the long run. Banks don’t typically offer high interest on checking accounts, meaning inflation could slowly eat away at your savings.
Put Your Extra Cash to Work
Let’s say you’ve got an extra $7,000 sitting in your account after covering your necessary expenses. Instead of letting it collect dust, here’s how you can put it to better use:
1. Open a High-Yield Savings Account
Traditional savings accounts offer low interest, but a high-yield savings account (HYSA) can help your money grow faster. Many online banks offer interest rates far above the national average, meaning you could earn a steady return without taking any major risks.
2. Consider a Certificate of Deposit (CD)
A CD is a great low-risk option if you’re willing to leave your money untouched for a while. It offers higher interest rates compared to regular savings accounts, and the longer you commit, the more you earn. If you don’t need immediate access to all of your savings, this could be a solid choice.
3. Invest in Stocks or Mutual Funds
If you’re open to a little more risk, investing in stocks or mutual funds can help your money grow significantly over time. You don’t have to be a financial expert—robo-advisors and investing apps can make it easy to start small and gradually increase your investments.
Why Sitting on Too Much Cash Can Hurt Your Finance
While it’s tempting to keep a big chunk of cash handy, too much liquidity can actually work against you. Here’s why:
- Low Interest Rates – Most checking accounts offer close to zero interest, meaning your money isn’t growing.
- Inflation – Over time, inflation decreases your money’s value, making it less powerful for future spending.
- Missed Investment Opportunities – Money that’s sitting idle could be earning more through savings, CDs, or investments.
By making small, smart moves, you can maximize your savings, grow your wealth, and still have enough cash available for emergencies.
Final Thoughts: Make Your Money Work for You!
Keeping money in your checking account is important, but keeping too much can be a wasted opportunity. By finding the right balance enough to cover expenses but not so much that it sits idle you can ensure your financial future is secure while also taking advantage of smarter wealth-building options.
So, don’t let your hard-earned cash sit there doing nothing! Move it wisely and watch it grow.
