Keeping Too Much Cash In Your Bank Account Could Be A Costly Mistake
Keeping Too Much Cash In Your Bank Account Could Be A Costly Mistake
Vishesh Raisinghani Sun, November 2, 2025 Moneywise
Keeping too much cash in your bank account could be a costly mistake — here’s how to know if you’ve got too much
Cash is king, right?
Well, not always. Sometimes you can have so much cash sitting around in your bank account that it turns into a wealth-devouring demon. On average, American families had about $62,410 in their checking accounts, according to the Federal Reserve’s 2022 Survey of Consumer Finances. For most people, that balance is simply higher than it should be.
Here’s why keeping too much cash on hand could be a serious mistake and a significant drag on your financial health.
The inflation tax
As of October 2025, the average national deposit rate on a checking account is just 0.07%, according to the Federal Deposit Insurance Corporation (1). That’s nowhere near enough interest to offset the rising cost of living.
In September, annual inflation was 3.0%, according to the Bureau of Labor Statistics (2). That means the average checking account is earning approximately 43x less than the rate of inflation.
But inflation isn’t the only problem. Idle cash also carries opportunity cost: that's the money you leave on the table when you don’t invest in assets that can generate income or growth.
What to do with cash instead
To fight inflation, consider moving some of your money into short- or medium-term securities with higher yields.
For example, Vanguard’s Federal Money Market Fund (VMFXX) offered a 4.08% yield as of September 26 (3). That’s higher than the current inflation rate, which can make it a better option than a checking account to preserve your purchasing power.
If you’re more concerned about opportunity cost, you might look into a low-cost index fund with higher risk – but also, the potential for higher return. Vanguard’s S&P 500 ETF (VOO) has delivered a compounded annual growth rate of 14.7% since its 2010 debut (4). And although past performance does not guarantee future returns, the point stands: keeping cash idle means missing out on growth potential.
You can easily invest in assets like VOO when you use platforms such as Acorns. When you make a purchase on your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and places the excess — the coins that would wind up in your pocket if you were paying cash — into a smart investment portfolio.
Their smart portfolios give you exposure to assets such as VOO, while ensuring you’re diversified across a number of different investments.
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