Keeping too much cash in your bank account could be a costly mistake — here’s how to know if you’ve got too much

Core Insights - Keeping excessive cash in bank accounts can negatively impact financial health due to inflation and opportunity costs [2][3][4] Group 1: Cash Management - The average American family holds approximately $62,410 in checking accounts, which is considered too high [2] - As of September 2025, the average interest rate on checking accounts is only 0.08%, insufficient to counteract inflation, which was 2.9% in August [3] - Idle cash can lead to opportunity costs, as it prevents investment in income-generating or growth assets [4] Group 2: Investment Alternatives - To combat inflation, it is advisable to invest in short- or medium-term securities with higher yields, such as Vanguard's Federal Money Market Fund (VMFXX), which offered a 4.08% yield as of September 26 [5] - For those concerned about opportunity costs, low-cost index funds like Vanguard's S&P 500 ETF (VOO), which has a compounded annual growth rate of 14.7% since 2010, are recommended [6] - A diversified investment portfolio typically outperforms keeping cash idle in a checking account, although maintaining a reasonable cash reserve for emergencies is still essential [7]