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Image source: Flickr user jridgewayphotography.

As a whole, we are a nation of poor savers.

Among developed countries in the Organisation for Economic Co-operation and Development (OECD), the United States' household savings rate of 4.8% in 2014 places is around the middle of the pack and well below the average household savings rate of the OECD. Comparatively, Germany's 9.4% household savings rate, Switzerland's leading 17.8% household savings rate, and Sweden with a 16% household savings rate in 2014 leave the U.S. in the dust.

But there is one odd area where Americans are keeping more money than at any point in the last three decades: their checking accounts.

An inside look at the average American's checking account
In July 2014, bank consulting firm Moebs Services released a report detailing that the average American carried $4,436 in their checking account by the end of 2013. This is the highest reading in the last 25 years. This figured jumped 10% from the average of $4,038 in checking accounts in 2012, and has soared more than fivefold since hitting an average balance of just $788 in 2007, prior to the Great Recession.

How do these figures compare historically, you wonder? According to Michael Moebs, economist and CEO of Moebs Services, the average checking account balance tends to be around $2,100. During good economic times when people aren't as worried about unemployment or wages, they tend to keep an average of $1,400 in their checking account. When times aren't good and the unemployment rate is high, consumers tend to keep around $3,000 (perhaps more) in their checking account.

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Image source: Flickr user Betsssssy.

Currently, we're witnessing an anomaly among consumers. The unemployment rate has been trending lower for practically six years now, and with the exception of weather-induced hiccups, U.S. GDP has demonstrated moderate to moderate-strong economic growth. The feeling of job security and nominal wage growth would normally spur consumers to be more liberal with their checking account cash. But not this time around.

Consumers clearly still have the scars from the Great Recession implanted in their memories, and having more cash handy at a moment's notice is important. Per Michael Moebs, consumers were sitting on $1.55 trillion in checking accounts at the end of 2013.

This is a big problem for consumers and banks
Unfortunately, carrying this much cash in a checking account could prove hazardous to consumers' and banks' health over the long run.

The future of banks is very much tied in with the health of the U.S. economy. Although you'd think consumers having ample cash might be a good thing, it's sometimes just the opposite for banks. When consumers are carrying around a lot of cash in their checking account, they're less likely to overdraw their account, need to transfer money, or incur a fee for not maintaining a minimum deposit balance. In other words, banks suffer because their fee-based income falls. Banks count on a strong economy to drive down checking account balances and drive up fees for spend-happy consumers. In the post-Great Recession world, we're just not seeing this happen.

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Image source: Flickr user RikkisRefuge Other.

However, the bigger concern is what might be happening to the investment power of consumers. According to Moebs, around 20% of the money held in checking accounts, or $315 billion, could be excessive.

Overall, there's nothing wrong with keeping money handy to pay bills and handle your daily spending. But checking accounts aren't money-generating machines. Since the Federal Reserve pegged its federal funds target rate at roughly a quarter of a percent in December 2008, checking accounts around the country have returned pennies (or, dare I say, fractions of pennies) on the dollar in annual interest to consumers. Yes, the money in your checking account is "safe" from nominal losses, but with each day that passes, consumers lose real money to the inflation rate.

In plainer terms, most goods and services are getting more expensive, and since your money isn't growing, it can no longer buy as much. That's a big problem!

Put that money to work
Understandably, each consumer's situation is going to be different. Some require more or less money in their checking account based on the monthly bills they need to pay. However, you need to be able to examine your individual situation and determine whether your balance is currently "excessive." What's excessive? I'd suggest any amount that you could afford to transfer to a savings or investment account and still easily meet your monthly bills would be construed as such. A good rule of thumb here might be somewhere between one to two months of expenses. Anything more would be excessive.

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Image source: Federal Reserve Bank of New York.

The good news is there are better places to park your money that could give you a substantially brighter outlook. For you ultra-conservative investors who might struggle to part with your cash, a money market account might be your smartest option. Unfortunately, money market accounts are still losing to the inflation rate, but you'll have relatively quick access to your funds and be given a much juicier interest rate. I can attest that opening an account with Sallie Mae with a minimum balance of $1 and a 1.07% yield sounds much better than the whopping 0.01% I'm earning in my checking account with JPMorgan Chase at the moment. Yes, I really did say 0.01%.

For those of you with a higher tolerance for risk and a craving for long-term rewards, investing in the stock market is always a novel idea. Stocks have returned an average of 8% historically. You will almost assuredly experience the ups and downs associated with investing at some point, but the key is to hang on over the long term and allow your winners to do the work for you.

An ingenious idea for investors with moderate levels of risk is to consider purchasing highly liquid exchange-traded funds, or ETFs. ETFs allow you to buy a basket of stocks representative of a country, sector, market, growth style, and so on. They give you instant diversity, quite a few pay a dividend, and if you choose a highly liquid one, you can hit the exit anytime you want if for some reason you need your investment money back.

But the keenest investors are going to consider taking their excess checking account capital and parking it in a Roth IRA. A Roth IRA is a nifty investment tool that allows your money to grow completely tax-free for life as long as you don't make any unqualified withdrawals before age 59 1/2. Best of all, unlike its IRA peer, the traditional IRA, you aren't required to begin making regular minimum withdrawals each year (which is the case once you turn 70 1/2 with a traditional IRA), and your contributions to your IRA don't have to stop once you turn age 70, as with a traditional IRA. A Roth IRA will allow you to keep investing for as long as you'd like without having to remove a penny. It's a great way to use compounding to your advantage, and also a nice way to retain your wealth as opposed to losing it to taxes.

So, what are you waiting for? Put that excess checking account money to work!

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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