Saving $10,000 is a huge milestone, and it's worth celebrating. That kind of money can solve a lot of problems. But it also raises some important questions, like where's the best place to keep that kind of cash?
A savings account might seem like the obvious option, but it's not always the best move. Here's what you need to know to decide if it's right for your money.
Benefits of keeping your $10,000 in a savings account
First things first: There's nothing wrong with keeping $10,000 in a savings account. If you're working with a reputable bank, your money will have Federal Deposit Insurance Corporation (FDIC) insurance up to $250,000 per person per account ($500,000 for joint accounts). This protects your money even if the bank fails. So there's no risk of loss as long as you protect your personal and banking information.
Keeping your money in a savings account can also help you earn interest over time. Interest rates vary depending on economic conditions. Currently, they're pretty high, with some of the best high-yield savings accounts offering rates exceeding 4.50%. That could earn you $450 or more in a year with a $10,000 initial deposit.
Using a savings account keeps your money accessible as well. This is extremely important if that $10,000 is part of your emergency fund or is for a large purchase you plan to make in the next couple of years. You usually don't want to invest this money because markets can be unpredictable in the short term. If you need to withdraw your cash when your investments are down, you'd have to settle for a loss. A savings account enables you to withdraw your money worry-free at any time.
The drawback to keeping your $10,000 in a savings account
Though savings account interest rates are high right now, they aren't guaranteed to stay that way. And even the best savings accounts probably won't earn you as much as investing would over the long term.
A certificate of deposit (CD) might be a better choice if you're worried about savings account interest rates falling throughout 2024. CDs give you a guaranteed interest rate for the entire term, which could be anywhere from a few months to several years, depending on the CD you choose. If you lock in a high CD rate now, you could potentially earn more in interest with one of these accounts than you could with a savings account over the next few years.
But you should note that you typically cannot touch money in a CD until the end of the CD term. If you access yours early, you'll usually pay a penalty equal to several months of lost interest. So it's not the right place for your emergency fund or cash you plan to use before the CD term ends.
Investing your savings is another option, but as mentioned above, market volatility makes this a poor choice for the money you plan to use soon. It can be a great option, though, for money you don't expect to use for years. The -- one of the most popular market indexes -- has a compound average annual growth rate of 10.7% over the past 30 years.
If you invested your $10,000 and it earned about 10% per year over the next 10 years, you'd wind up with close to $26,000. No savings account will earn you that much over that time.
It doesn't have to be all or nothing
There are pros and cons to all of the above options. If you're not comfortable putting all your eggs in one basket, consider spreading your money around. Keep some in a savings account and put the rest in a CD, brokerage account, or retirement account. This can help you earn higher yields while also keeping some of your cash readily accessible. Think through all your options and go with the approach that you're most comfortable with.
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FAQs
The first thing you might wonder is whether it's even safe to keep that much cash in a savings account, and it definitely is. All reputable savings accounts carry up to $250,000 of Federal Deposit Insurance Corporation (FDIC) insurance per person, per bank, per ownership category.
How much cash is too much in savings account? ›
How much is too much savings? Keeping too much of your money in savings could mean missing out on the chance to earn higher returns elsewhere. It's also important to keep FDIC limits in mind. Anything over $250,000 in savings may not be protected in the rare event that your bank fails.
Should I keep $10,000 in savings? ›
Benefits of keeping your $10,000 in a savings account
This protects your money even if the bank fails. So there's no risk of loss as long as you protect your personal and banking information. Keeping your money in a savings account can also help you earn interest over time.
How much interest will $10,000 earn in a savings account? ›
The Bankrate promise
| Type of savings account | Typical APY | Interest on $10,000 after 1 year |
|---|
| Savings account paying competitive rates | 5.25% | $539 |
| Savings account paying the national average | 0.58% | $58 |
| Savings accounts from various big brick-and-mortar banks | 0.01% | $1 |
Apr 2, 2024
For savings, aim to keep three to six months' worth of expenses in a high-yield savings account, but note that any amount can be beneficial in a financial emergency. For checking, an ideal amount is generally one to two months' worth of living expenses plus a 30% buffer.
Is it safe to keep large amount in savings account? ›
Low-Risk: Savings accounts are low-risk investments, which means that you don't have to worry about losing your money. Unlike stocks, bonds, or mutual funds, savings accounts don't fluctuate in value, making them a reliable place to keep your money.
Is 40k in savings good? ›
While $40,000 is a good start on the road to building a nest egg, you probably want to retire with a lot more money than that. But it may be more than possible if you commit to saving and investing in a brokerage account consistently for the remainder of your career.
What percentage of people have 10k in savings? ›
Most Americans have $5,000 or less in savings
| Savings account balance | Percentage of respondents |
|---|
| $500 to $1,000 | 8% |
| $1,001 to $5,000 | 22% |
| $5,001 to $10,000 | 8% |
| $10,000 to $20,000 | 7% |
3 more rowsOct 18, 2023
Depositing a big amount of cash that is $10,000 or more means your bank or credit union will report it to the federal government. The $10,000 threshold was created as part of the Bank Secrecy Act, passed by Congress in 1970, and adjusted with the Patriot Act in 2002.
Is 100k in cash savings good? ›
There's no one-size-fits-all number in your bank or investment account that means you've achieved this stability, but $100,000 is a good amount to aim for. For most people, it's not anywhere near enough to retire on, but accumulating that much cash is usually a sign that something's going right with your finances.
A rule of thumb is to set aside 50% of your income for necessities, 30% for discretionary expenses and 20% for savings. Use this free savings calculator to project how your money can grow over time.
What amount of savings is considered wealthy? ›
Someone who has $1 million in liquid assets, for instance, is usually considered to be a high net worth (HNW) individual. You might need $5 million to $10 million to qualify as having a very high net worth while it may take $30 million or more to be considered ultra-high net worth.
Is $20,000 in savings good? ›
Depositing $20,000 in a savings account is wise when you have a plan for the money, such as a near-term expense or rainy day fund. For long-term goals, like retirement, you might be better served by opening a brokerage account or certificate of deposit (CD).
What is the maximum cash limit in savings account? ›
Cash Deposit Limits in a Savings Account
Depositing cash above the limit of ₹1 lakh may attract the attention of the Income Tax department. And the annual maximum depositing limit in a savings account is ₹10 lakhs.
Is 100k too much in savings account? ›
While reaching the $100,000 mark is an admirable achievement, it shouldn't be seen as an end game. Even a six-figure bank account likely won't go far enough in retirement, which could last as long as 30 years.
Is it bad to deposit 20k cash? ›
Depositing a big amount of cash that is $10,000 or more means your bank or credit union will report it to the federal government. The $10,000 threshold was created as part of the Bank Secrecy Act, passed by Congress in 1970, and adjusted with the Patriot Act in 2002.
