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 too high.
Here’s why keeping too much cash on hand could be a serious mistake and a significant drag on your financial health.
As of September 2025, the average interest rate on a checking account is just 0.08%, according to U.S. News. (1) That’s nowhere near enough to offset the rising cost of living.
In August, annual inflation was 2.9%, according to the Bureau of Labor Statistics. (2) At that rate, your money is likely to lose half its purchasing power in roughly 24 years.
But inflation isn’t the only problem. Idle cash also carries opportunity cost — the money you leave on the table when you don’t invest in assets that can generate income or growth.
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 makes it an ideal option if you’re focused on preserving purchasing power.
If you’re more concerned about opportunity cost, you might look into a low-cost index fund. Vanguard’s S&P 500 ETF (VOO) has delivered a compounded annual growth rate of 14.7% since its 2010 debut. (4)
To be fair, past performance doesn’t guarantee future returns, but the point stands: keeping cash idle means missing out on growth.
Investing your cash in a diversified portfolio generally beats letting it sit in a checking account. But that doesn’t mean you should drain your balance completely. There’s still a healthy amount of cash you’ll want to keep on hand.
Read more: Robert Kiyosaki warns of a ‘Greater Depression’ coming to the US — with millions of Americans going poor. But he says these 2 ‘easy-money’ assets will bring in ‘great wealth’. How to get in now
Cash remains your best source of emergency funding. If you suddenly lose your job, face an unexpected medical bill or need a quick repair on your car, you’ll want fast access to some funds.