Why $50K in Savings Is Probably Too Much

Having lots of money in the bank is never a bad thing. But once you've built up a sizable amount in savings -- say, $50,000 -- it's time to ask: Is some of that money better off elsewhere?

Once you've built up an emergency fund (enough to cover three to six months of expenses), keeping additional cash in your savings account means you're missing out on chances to grow your money. Here's where to move that extra cash instead.

Make more by moving your money

Here are a few strong options for earning on your excess savings:

• Certificates of deposit (CDs): With CDs, you'll lock up your money for a given term -- months or even years -- but in return you can get a high APY that won't change. Current CD rates are as high as 4.55%.
• Individual retirement accounts (IRAs): IRAs let you invest for retirement with tax advantages. A Roth IRA, for example, grows tax-free and allows tax-free withdrawals in retirement. Through IRAs, you can purchase stocks, bonds, or funds that grow much faster than cash over time.
• Brokerage accounts: Just like IRAs, brokerage accounts allow you to invest in stocks, bonds, and funds. They don't offer tax breaks, but anybody can open one and invest as much as they want. It's a smart place to grow extra savings that you don't need in the short term.

CDs are great for getting a guaranteed return on your money. And by investing in index funds, like one that tracks the S&P 500, you can safely assume that your money will grow steadily over time -- at a much better rate than a savings account.

When to hold on to your cash

There are a few good reasons to hold a big cash cushion. If you're planning a large purchase or foresee a financial emergency of some kind, a larger savings account makes sense.

But beyond that, holding $50,000 or more in a basic savings account is usually more of a missed opportunity than a smart strategy.

Also, most traditional savings accounts offer interest rates below 1.00% APY. For short-term savings and emergency funds, a high-yield savings account (HYSA) is a better option. Right now, the best HYSAs are offering 4.00% APY or higher. That's still not as high of a return as you could get elsewhere.

Put your money to work today

Lots of cash is never a bad thing, but letting your excess savings sit in a low-interest account means you're probably missing out on long-term growth.

Once you've covered your emergency needs, consider shifting extra funds into CDs, IRAs, or brokerage accounts. You've worked hard to save up -- now let that money work for you.