Here's What Happens When You Have More Than $250,000 in Savings

When your savings balance climbs above $250,000, it's more than just a financial milestone -- it triggers a set of rules that determine how much of your money is actually protected. The Federal Deposit Insurance Corporation (FDIC) only insures deposits up to certain limits, which means part of your balance could be exposed if your bank were to fail.

And while bank failures are rare, the events of the past few years have shown that they can happen.

Here's how insurance limits work, how to extend their coverage, and whether it even makes sense to keep that much cash in the bank in the first place.

How the $250,000 FDIC limit works

The FDIC protects bank deposits up to $250,000 per depositor, per bank. Credit unions work similarly through NCUA insurance.

That limit applies to all your deposits at the same institution combined. So if you have $100,000 in a savings account and another $160,000 in a CD at the same bank, you're sitting at $260,000 total -- which means $10,000 of your money isn't insured.

If that bank were to fail, the FDIC would cover the first $250,000, and the remaining amount could be at risk.

Ways to expand insurance without doing anything fancy

If your balance exceeds the FDIC limit, here are the simplest ways to stay fully protected:

1. Spread your cash between banks.

First off, you could split your cash pile across two different FDIC-insured banks, which effectively doubles your potential coverage. Each bank gets its own $250K limit because coverage is per depositor, per institution.

2. Use joint accounts if you have a partner.

Joint accounts also double your coverage at a single bank. Two names on the account can get you $500,000 of protection at that one institution. This is one of the simplest ways to extend coverage, assuming you have a trusted partner with shared money.

3. Confirm your institution is insured.

Most banks and credit unions are legit, but don't assume -- especially with fintech banks. A quick check via this FDIC BankFind tool can save big headaches. Some banking apps actually hold deposits through partner banks, and those institutions usually carry the FDIC insurance.

Want extra peace of mind? Check out our list of the 10 safest banks in the U.S. before choosing where to keep your savings.

Why holding too much cash can hold you back

If you've got more than $250,000 sitting in a plain old savings account, FDIC limits aren't your only concern.

You might simply be keeping too much cash on hand in the first place.

Cash is safe, but it's not a great long-term wealth builder. Even earning a 4% return from a great high-yield savings account sounds solid… until you compare it to decades of stock market returns with an average return of 10%.

For example:

• $200,000 earning 4% in a savings account for 20 years grows to roughly $438,000.
• $200,000 invested in the stock market earning 10% annually grows to about $1.35 million.

That's nearly a million-dollar difference, all from choosing long-term stock investing over long-term cash storage.

Cash absolutely has its place for emergency funds, short-term goals, or money you're going to spend over the next year or so.

But in the end, keeping only what you truly need in cash protects you from FDIC insurance gaps, and gives the rest of your money a chance to grow through long-term investing.