Most of us were taught to save, save, save. And don’t get me wrong, having a solid emergency fund (or “Peace of Mind account” as I like to call it) is so important. It protects you when life throws curveballs and helps you avoid racking up debt or selling investments at the worst possible time. And although not many people talk about this, it is possible to have too much money in your savings account and it could be holding you back financially.

Maybe you’re one of those people who have created the fantastic habit and discipline around building up your savings account. It feels safe, and frankly, it’s fun to watch your account consistently go up over time. 

But while saving shows discipline (and you should be proud of what you’ve built!), there comes a point where having too much in savings is actually costing you real wealth and opportunities.

Why Savings Are Important (But Not Everything)

Savings accounts are amazing for:

• Covering unexpected expenses without disrupting your lifestyle
  
• Avoiding credit card debt and paying interest when emergencies pop up
  
• Keeping cash liquid and accessible for short term needs 
• Earmarking funds for large purchases and short term goals

That’s the “peace of mind” part. But the trade off? Most traditional savings accounts barely pay you anything (we’re talking 0.01%–0.50% interest…next to nothing). That’s nowhere near enough to keep up with inflation, which means your money is quietly losing value every year.

Because of that, keeping large sums parked in a standard Big Bank savings account isn’t doing you any favors. Instead, your cash should be working smarter for you. 

A better option? Moving those funds into a high yield savings account, where your money can at least grow at a stronger rate while still staying liquid and accessible. I’ve rounded up some of my favorite HYSA options for you here.

But there’s a point where having too much sitting in savings works against you. It’s the moment you need to ask yourself: is this really the smartest place for my money over the long term?

If this feels like you, if you’re nodding along right now, then it might be time to start seriously thinking about putting more of that money to work. 

Now, let me be clear: I’m not suggesting you dump your entire savings account into the market all at once. You’ve worked too hard for that money to make a rash move, and honestly, doing it all in one shot would feel overwhelming and that’s not what we’re about around here. 

Instead, think of this as a step by step process. Below, I’m breaking down the key factors I’d look at before shifting extra savings into investments, along with the practical steps I’d take if I were sitting on a larger than necessary cash pile (good problems to have!).

Step 1: How Much Should You Really Keep in Savings?

The right savings amount isn’t the same for everyone, it depends on your lifestyle, your goals and ultimately what you really need for your own peace of mind to feel secure. Here are a few key guidelines to help you figure out your number:

• Emergency Fund:
  • Aim for 3-6 months of your monthly lifestyle expenses. If you own a home, have children or pets in the mix, lean toward the higher side. Because let’s be honest, when you’ve got more responsibilities, the chances of a big (and usually expensive) surprise popping up are basically guaranteed. 

• Short-Term Goals:
  • Saving for something specific in the next 1–3 years (like a home, car, or vacation)? Keep that money in savings. There is no reason to take on unnecessary risk if you know you’ll need the cash soon.

• Peace of Mind: 
  • This part is the most personal. There’s the amount I’d recommend, and then there’s the amount that helps you sleep at night—they’re not always the same. If you feel better with more stashed away, that’s okay. Just make sure it’s an intentional choice, and that you understand the trade-offs of keeping too much money parked in savings.

Anything beyond those numbers is likely excess cash that could be working harder for you in investments.

Step 2: Assess Your Debt

Before investing extra cash, take a good look at your debt. 

• Write down all of your existing debt, noting the amounts outstanding with their corresponding interest rates and monthly payment. 

• Prioritize paying off high-interest debt (5% or higher) before investing. Credit card debt especially eats away at your financial health faster than the stock market can grow your money.

Step 3: Smart Ways to Invest Excess Savings

Once you’ve set aside your emergency fund and tackled high-interest debt, it’s time to make your money grow. Here are the best places to start:

1. Max Out a Roth IRA (If Income Eligible)

If your income qualifies, this is one of the best places for excess savings. Why?

• Tax-free growth
• Tax-free withdrawals in retirement
• Flexibility to withdraw contributions (not earnings) if needed

Check out my past blog post on the Roth IRA to see why I rank it at the very top of your investing priority list. 

2. Increase Your 401K Contributions 

If you already have a 401K or employer provided retirement plan, consider upping your contribution rate.

• Traditional 401K: Pre-tax contributions, meaning it lowers your taxable income today, you get the benefit of tax deferred growth, then to be taxed upon withdrawals in retirement. 
• Roth 401K: Contributions taxed now, but all growth and future withdrawals in retirement are tax FREE
  

Not only will you grow retirement savings faster, but you’ll also automate the process, which I could argue is one of the most difficult parts of investing for most people – staying consistent. 

3. Open a Taxable Brokerage Account 

If you’ve maxed out retirement accounts, a taxable brokerage account is your next best option. Here are a few things to consider:

• Flexibility: no income or contribution limits & you can take money out of the account whenever you need
  
• Investment Freedom: You can invest in a wide variety of investments from stocks, bonds, Treasury Bills, Gold, etc. There’s no set list to choose from like your employer provided retirement plan. 
  
• Taxation: You need to be mindful of capital gain, dividend and interest income generated in this account because unlike your retirement accounts – you will be taxed on it the year the income is recognized.

This account gives you the ultimate freedom and absolutely should be prioritized as a side kick to your retirement accounts.  

Why I Encourage Dollar Cost Averaging

One of the biggest hurdles to investing a lump sum is the emotional side. That’s why I typically suggest considering dollar cost averaging (DCA) into the market. 

Here’s an example: Let’s say you only need about $50,000 in savings, but right now you have about $90,000. That leaves $40,000 on the table to invest. Instead of investing it all at once and risking a heart attack, you could do little by little over time by investing roughly $3,300 into the market each month for 12 months.

This strategy helps:

• Reduce risk of poor timing
  
• Build a habit (just like saving!)
  
• Ease the emotional stress of moving money into investments when you’ve been holding it near and dear in your savings account

Bottom Line: Don’t Let Your Money Sit Idle

It’s amazing to have built a strong Peace of Mind account. That shows discipline, consistency, and commitment and you should be proud of that. But if you’ve got more sitting there than you need, your money is quietly losing value to inflation and you’re probably feeling lost about what to do with it.

Instead, let that excess savings start working for you. Whether it’s paying off debt, a Roth IRA, 401K, or a brokerage account, the sooner you invest, the more time your money has to grow.

And remember: investing doesn’t have to be overwhelming. You’ve already proven you can save, investing is just taking that foundation one step further! 

Ready to take the next step with your money? Learn more about my services here so I can help you create a plan that actually works for your life, your goals, and your financial future.