Do you have too much cash? I regularly see high-earning women with $50,000, $100,000 or even $225,000 in their checking accounts.

It goes something like this – you got a good paying job a couple years ago. You spend less than you make. The money starts piling up. You’re busy and afraid to do the wrong thing. So it’s easier to do nothing and the money keeps rolling in.

While this is a good problem to have, it IS a problem.

Why?

1) It’s risky to keep that much in a checking account, AND
2) You’re losing out by not putting your money to work. As of June 2023, you could be earning at least $4,000/year on that $100K

Having some cash is important

Most financial experts recommend having at least 3-6 months of expenses on hand. For example, if it costs your family $10,000/month to live your life, consider having between $30-60K in your emergency fund. If you own a home, have kids, you are the sole earner in your household, or are self-employed - you might consider increasing this.

That said, the average person probably needs no more than 1-2 months worth of expenses in their checking account at a given time.

So do yourself a favor and put the remainder of your emergency fund somewhere paying you more than 0.01%.

4 places to earn more on your cash:

Note: moving cash to a better savings vehicle is not a replacement for investing. This article does not cover how much money to keep in cash vs invest — but you do need to invest for long term goals like retirement. Money you need in the near term likely should be in a safer vehicle like those discussed in this article, whereas money for longer term goals might be invested (with an appropriate asset allocation based in your risk and preferences).

1) High Yield Savings Account (HYSA)

Overview: A regular savings account, but offered through an online bank with a higher rate of return.
Pros: Good rates. Account opening takes less than 5 minutes. Easy and fast access to your money.
Cons: Lower rates than Treasuries right now.

My 2 cents? Everyone should have a a high yield savings account. My personal favorite is Ally Bank. They have this awesome bucketing feature that allows you to organize your savings. Other banks have higher rates right now, but I’ve been a happy Ally customer for more than 14 years and their rates are consistently near the top of the market. As of June 2023, Ally’s HYSA is paying 4%.

*I’m a big Ally Bank fan, but any FDIC insured bank will do!*

2) Certificate of Deposit (CD)

Overview: CDs are savings products offered by banks. You loan the bank a specific amount of money for a certain period of time (e.g. 12 months, 18 months, etc). You will earn a pre-defined interest rate. At the end of the term, you can roll your money into another CD or take it out.
Pros: Better than the 0.1% you’re getting at your brick and mortar bank.

Cons: Lower rates than other options right now. Less flexibility/access to your money.

CDs are a great place to put money that you know you don’t need for a set period of time. They are not a good place for an emergency fund, or money that you want to keep available. Most CDs have an early withdrawal penalty.

*An example of a 12-month CD from Ally Bank*

3) I-Bonds

Overview: Inflation adjusted bonds from the US federal government. These were all the rage about a year ago when rates were 9.65%. As inflation has come down, so have the rates on these. Currently paying 4.30%.
Pros: Better than the 0.1% you’re getting at your brick and mortar bank.

Cons: Less flexible: Minimum investment period of 12 months and you lose 3 months of interest if you withdraw in 5 years or less.

I-Bonds were attractive last year, but at this point most people would be better off with a high yield savings account where you can get similar rates with more flexibility.

*I-Bonds are currently paying 4.3% as of June 2023*

4) Treasury Bills

Overview: A Treasury bill (T-Bill) is a short-term U.S. government debt obligation backed by the Treasury Department with a maturity of one year or less. Treasury bills are usually sold in denominations of $1,000.
Pros: Highest rates of return right now. The interest you earn is exempt from state and local income taxes. As of June 2023, six month T-Bills have rates just over 5% (recent auction data).

Cons: Intimidating to purchase if you’ve never done it before. You purchase bills at auction, which means you don’t know until after the fact exactly what rate you’ll lock in.

Great option for money optimizers (you know who you are) – who enjoy eking out every last dollar from your portfolio. Terrible idea if you’re uncomfortable navigating a brokerage website, or don’t have a mentor to guide you on your first purchase. You can purchase T-Bills from TreasuryDirect.gov or any brokerage firm. Personally, I find using a brokerage firm much preferable to dealing with the antiquated Treasury Direct website. However, figuring out where to go and how to place an order from your brokerage can be challenging if you’ve never done it before.

Different bill maturities are available for purchase on different days of the week. The rate you receive is guaranteed (by faith and credit of the US government) as long as you hold the bond until maturity. If you sell your T-Bill on the secondary market before it reaches maturity, the rate is not guaranteed. Bonds are issued at a discount from the par value – which means that if you buy a $1,000 bond - it actually will cost about ~$970 and the $1,000 will be paid out to you upon redemption. Learn more here.

*You can view recent auction results on the Treasury Direct website*

Beth Williams is the Founder of Future Wallet, where she helps millennial women break free from the grind of their careers and use their money to craft a better life.

Beth has a MBA from the UC Berkeley Haas School of Business and has been featured in the Washington Post. She’s worked with hundreds of millennial women at companies such as Google, BCG, Intuit, Meta, Spotify, Sephora, and Disney. You can find Beth dancing Cuban salsa when she’s not nerding out about compound interest.

4 Ways to Earn More on Your Savings