Why $50K in Savings Is Probably Too Much

Let's be real: having $50,000 in the bank feels awesome.

But the reality is sitting on a big fat cash pile isn't actually helping you build wealth. It's just keeping your progress on pause (and losing value to inflation month after month).

If you've already covered your emergency fund, holding onto $50,000 (or more) in cash might be doing more harm than good.

How much cash do you really need?

Most financial pros suggest keeping three to six months of living expenses in a high-yield savings account (HYSA). This is your emergency fund for life's curveballs.

For example, my wife and I spend somewhere between $3,500 and $5,000 a month, depending on what life throws at us. To cover emergencies, we keep around $20,000 in an HYSA -- enough for us to sleep well at night.

But for anything above that, we invest it.

Letting too much money sit in cash feels like a missed opportunity. Because it can earn way more and grow bigger in the long run if invested wisely.

Where to move your excess cash

Once your emergency fund is fully loaded, it's time to make your extra dollars pull their weight.

Here are three of my favorite places to stash overflow cash -- depending on your goals and timeline:

• Retirement accounts: Before anything else, consider bumping up your contributions to a Roth IRA or 401(k). These accounts come with tax advantages and long-term growth potential. If you're not already maxing them out, this is the place to start.
• Brokerage accounts: If you've already hit your retirement contribution limits, a regular brokerage account is a great next move. There aren't any tax perks, but there also aren't any limits, so you can invest as much as you want, whenever you want.
• Certificates of deposit (CDs): For short- to mid-term goals, a CD offers a guaranteed return without the ups and downs of the market. Just make sure you're locking in a top-tier APY -- especially while rates are still high.

When holding cash makes sense

Of course, there are times when a big cash stash is the right move.

Back when I was buying and selling rental properties, I'd often keep large chunks of cash on the sidelines so I could be ready to jump on deals when they popped up.

For you, it might look different. Maybe you're planning a big move, a long sabbatical, or just want peace of mind having a thick financial cushion. Sitting on big chunks of cash is OK -- as long as you have a plan for it.

Just make sure your cash is earning the highest APY possible. If you've got a savings account paying under 1.00% APY, you're missing out on a lot of interest.

The best high-yield savings accounts right now have APYs in the 4.00% APY range.

Looking for a better home for your short-term cash? Compare the best high-yield savings accounts and start earning more today.

Let your money hustle like you did

You've already done the hard part of saving the money. Now it's time to put your cash to work.

A stagnant $50,000 could be growing to $60,000 in the right spot. Or $70,000. Or much much more over the long haul.

You don't have to go all-in on investing overnight. Start by shifting a chunk into a CD or opening a brokerage account and investing in a low-cost index fund. One move at a time.