A woman holding a handful of money and pumping her fist in happiness.

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It's good to have assets in cash, but only for a short time.

Key points

  • It's important to have money in cash for emergencies.
  • Too high a cash balance could mean denying yourself a chance to grow your money.
  • If your emergency fund is good to go, consider opening a brokerage account to invest your excess cash.

The best high yield savings accounts can be found by The Ascent.

Three to six months' worth of living expenses can be kept in a savings account. You don't know when a financial emergency could happen. If you don't have cash reserves, you can't do simple things like put food on the table and keep the lights on.

There is something wrong with having too much cash. If you go that route, you won't be able to grow your wealth over time.

Americans' cash balances are surprisingly high

Personal Capital surveyed its users recently and found that overall, Americans had $59,506.81 in cash. Not surprisingly, older Americans tended to have more cash than younger ones. The median cash balance among 30-somethings, for example, was $50,974.75, while the median cash balance among those in their 60s was $119,289.96.

These figures seem to be positive at first glance. Some people might have too much money.

The median cash balance for 50-somethings was nearly $100,000. The average monthly expenses in the US were found to be $5,111 by the Ascent. $96,726.06 is a lot of money to have on hand for emergencies if you spend over $5,000 a month on living expenses.

You don't need $97,000 in cash to cover a full year of bills if you spend $5,000 a month.

The problem with too much cash

It's problematic if you overfund your emergency savings. It might cause you to lose out on growth.

Savings accounts are paying more money after years of low interest rates. 2% is a good rate for a savings account.

If you invested your money in a brokerage account, you could potentially get a yearly return of 5% or 6%, with a fairly conservative portfolio of investments that aren't considered so risky. You can easily generate annual returns of 8% or more with a heavy stock portfolio.

If you have enough cash to cover a year's worth of bills, there's no reason not to invest it. If you are in a dual-income household, you may be able to fund your emergency savings at a lower amount.

Investing money means taking some risk that you will not have to worry about in a savings account. It means opening the door to bigger rewards.

Many people are missing out on guaranteed returns because their money is sitting in a big bank savings account. The best online savings accounts can earn you more than the average savings account rate. Click here to discover the best-in-class picks that landed a spot on our list.