Why I'm Moving Money Out of High-Yield Savings in July 2025

High-yield savings accounts (HYSAs) are a great place to park your cash -- but not all of it. They're safe, accessible, and federally insured. At a certain point, though, their appeal starts to fade, and putting too much money in savings could hurt you in the long run.

I recently decided it was time to move some of my money out of my HYSA. It's not because interest rates are about to drop (which they could, soon), but because my financial goals have shifted.

Here's why I'm putting that money to work elsewhere -- and where it's going instead.

1. I've hit my emergency fund target

Most experts suggest stashing enough money to cover three to six months of expenses in a savings account. This buffer will help you get through a period of unemployment or cover big expenses like car repairs, medical bills, and other curveballs life may throw at you.

After a recent financial checkup, I realized I'd gone a bit overboard. I had more than six months' worth of expenses in my HYSA -- more than I really needed sitting in savings.

2. My Roth IRA offers way more upside

With my emergency fund squared away, the next step is investing for growth. I already contribute 15% of my paycheck to my 401(k), including my employer match. After that, a Roth IRA is the best place for my money.

Unlike a regular brokerage account, a Roth IRA lets your investments grow completely tax-free: no capital gains tax, no dividend tax, and no income tax on qualified withdrawals in retirement.

My 401(k) is a Roth-type account, too, so it has the same tax benefits. Between these two accounts, I could save $300,000 or more on taxes in retirement (based on my current balance and estimated gains).

Right now, my Roth IRA is mostly invested in a low-fee S&P 500 index fund. That gives me broad exposure to the U.S. stock market without the need to bet on individual stocks. And the long-term performance speaks for itself: The S&P 500 has gained an average of 10% per year -- more than twice the APY of today's best savings accounts.

Even if the market dips now and then (and it will), history shows that long-term investing in stocks beats parking your cash in savings.

3. Inflation eats into HYSA earnings

Even when interest rates are high, inflation can still outpace your savings account's APY. Right now, many top HYSAs pay between 3.50% and 4.20%. But the current inflation rate -- 2.70% year over year -- is almost enough to wipe out those earnings.

In some years, you may actually lose purchasing power. That's not a deal-breaker if your money is earmarked for short-term goals. But for money you don't need to touch for years? You can probably do better.

What I'm keeping in my HYSA

I'm not emptying the account -- far from it. I still keep several months' worth of expenses on hand for emergencies, plus cash for upcoming travel. HYSAs are perfect for:

• Emergency savings: three to six months' worth of expenses is enough for most people
• Short-term goals: big purchases you expect to make in the next few years
• Buffer cash: people with unpredictable expenses and income could use some extra cushion

But for money I want to grow -- like retirement savings or funds for a future down payment -- I'd rather take some risk and aim for a better return. Especially in an account like a Roth IRA, where that growth isn't taxed.