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How Much You Should Save In a Savings Account, According to Experts — And It’s Not ‘as Much as You Can’ – NextAdvisor

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The COVID-19 pandemic, and ensuing economic uncertainty, taught many Americans the importance of having adequate savings. But is there such a thing as having too much in savings?

Yes, financial experts say.

While the general rule is that you should keep three to six months of living expenses as an emergency fund, keeping too much money in a savings account can actually cost you.

“Your cash sits idle and loses value due to inflation,” says Lauren Anastasio, director of financial advice at financial technology company Stash. “That downside offsets the need for keeping the cash on hand for an emergency or loss of income.”

That doesn’t mean you should spend all your excess cash, however. Rather, you should invest it in the stock market so that your money can grow long-term. While how much you should keep in your savings account depends on your individual financial goals and situation, if you find yourself with more than a year’s worth of living expenses in savings, it may be a sign that you should move your money to an investment account where it can work harder for you. 

How Much Can You Save in a Savings Account?

Banks and credit unions typically don’t have account maximums, nor are there any laws limiting how much you can keep in a bank account. So, you can deposit as much as you want into a savings account.

However, one thing you should be aware of is FDIC insurance limits. Established in 1933 in response to the many bank failures during the Great Depression, the Federal Deposit Insurance Corporation (FDIC) protects consumers’ bank deposits in the event of a bank failure. 

FDIC deposit insurance applies to all deposit accounts at FDIC-insured banks; this includes checking accounts, savings accounts, money market accounts, and CDs. FDIC insurance will protect up to $250,000 in deposits per consumer per account. 

Credit union accounts have deposit insurance, also up to $250,000 per account, through the National Credit Union Administration (NCUA).

“There are many ways to go above that,” says Ken Tumin, senior industry analyst with LendingTree and founder of DepositAccounts.com. “For example, a joint account with a spouse is covered up to $500,000.” Spreading your money across multiple savings accounts with different banks is another way to ensure all your money is insured.

What Is the Average Savings Account Interest Rate? 

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Source: https://time.com/nextadvisor/banking/how-much-in-savings/

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