Is $10,000 Too Much to Keep in a Savings Account?

Inflation eats away at the value of your cash. You can keep $10,000 in a high-yield savings account to slow the pace of depreciation and keep your money working for you. On the other hand, there are better ways to build wealth than by putting cash into a savings account.

Whether $10,000 is too much depends on two factors: your monthly spending and what you're using your savings account for (emergency fund, short term goal, investment buffer, etc). The goal is to make sure your money is safe while taking advantage of limited opportunities.

Keep three to six months of spend in an emergency fund

Keep $10,000 in a savings account when it meets your emergency fund goals.

An emergency fund is where you put money that you'll need when life happens and the inevitable follows: You need money right away, more than you have in your checking account. It's where you pay for unexpected bills, like roof repairs or surgery for your sick dog.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of December 28, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of December 28, 2024. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

Many financial experts recommend building an emergency fund equal to three to six months' worth of expenses. Say you spend $3,000 monthly. You can put $10,000 in an emergency fund to keep you on your feet in case you lose your job for a few months.

Keep $10,000 in your account to meet a short-term goal

Keep $10,000 in a savings account to cover a short-term goal.

Vacation funds, home or car down payments, and back-to-school budgets fall into this category. If you need $10,000 set aside to cover the extended family's Christmas gifts, by all means, save up. A savings account is a great place to put money you'll need within the next year or so. You can typically withdraw your savings without paying fees.

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Keep $10,000 in your savings to create an investment buffer

Keep $10,000 in a savings account to meet your long-term investment goals.

In his NYT bestselling book The Psychology of Money, Morgan Housel suggests you keep a cash cushion to create "room for error" and to keep mentally stable. Sometimes, the stock market tanks, and the temptation to panic sell grows overwhelming.

Cash can keep you from making decisions that you'll regret when the market calms and you have room to breathe. A savings account is a great place to keep a cash cushion. Some brokers even offer cash management accounts with competitive APYs.

Federal rate cuts reduce your interest rates

Consider investing $10,000 in a certificate of deposit (CD) to combat rate cuts.

Certificates of deposits (CDs) are savings accounts that offer fixed rates over months or years. You can open one to lock in a rate before the Federal Reserve drops rates further, dragging your savings rate with it. Compare CDs with APYs above 4% to lock in a high rate.

The tradeoff here is that you can't withdraw from CDs before they expire without paying penalties (unless you open a no-penalty CD, which typically have lower rates). So savings accounts tend to be the superior place to build emergency funds and save for short-term goals.

When $10,000 is too much savings

Every dollar you put into a low-yield savings account is wealth lost to inflation.

Low-yield savings accounts pay you so little interest income, it doesn't even cover the cost of inflation. There are better ways to build wealth. Switching banks and putting $10,000 in a high-yield savings account helps your cash maintain value when grocery prices go up.

Opening a CD and investing in the stock market are even better ways to beat inflation. You can typically build more wealth long term than with just a savings account. But for short-term goals, emergency funds, and cash cushions, savings accounts are tough to beat.