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.
Featured offer: save money while you pay off debt with one of these top-rated balance transfer credit cards
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.
These savings accounts are FDIC insured and could earn you 11x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.
FAQs
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).
Is $10,000 too much to keep in a savings account? ›
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 money is too much to keep in your savings account? ›
How much is too much? The general rule is to have three to six months' worth of living expenses (rent, utilities, food, car payments, etc.)
Is having 10k in savings a lot? ›
Reaching a five-figure savings account is a significant financial milestone. If you have $10,000 in the bank, you've got something to brag about. According to the TransAmerica Center for Retirement Studies, you've managed to double the non-retirement savings of the median adult in America.
What is the maximum you should keep in a savings account? ›
Your emergency fund
Most experts suggest that you should keep between three and six months' worth of expenses in your emergency account at all times. So, if you have $4,000 per month in expenses, you should have between $12,000 and $24,000 in liquid savings at all times.
What's the most money you should keep in a savings account? ›
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.
What is considered a good amount of savings? ›
Here's a final rule of thumb you can consider: at least 20% of your income should go towards savings. More is fine; less may mean saving longer.
How much will $10,000 make in a high yield savings account? ›
How much $10,000 becomes in one year. Putting $10,000 into a savings account with an APY of 5.00% means you could have about $10,511 just one year later. That's more than $500 of free money in just 12 months!
How much does the average middle class person have in savings? ›
The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.
What is the maximum amount you can keep in a savings bank account? ›
How Much Money Can You Keep in Savings Account? There is no limit on how much money you can keep in a savings bank account. However, banks have a minimum balance requirement that needs to be maintained in your savings bank account. If you fail to do so, you need to pay a penalty.
Most financial experts suggest you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000. Personal finance guru Suze Orman advises an eight-month emergency fund because that's about how long it takes the average person to find a job.
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.
How much will $10,000 make in a high-yield savings account? ›
If you have $10,000 to invest, here's what your earnings would be at different interest rates: After one year with a regular account at 0.42%: $10,042.00. After one year with a high-yield account at 4.50%: $10,450.00. After one year with a high-yield account at 5.00%: $10,500.00.
Is it safe to keep a lot of money in savings account? ›
Money in a savings account is safe when the account is held at an FDIC member bank. The FDIC insures savings accounts and other deposit accounts up to $250,000 per depositor, per account ownership type, per financial institution.
How much money should be left in savings account? ›
Reserve 20% of your income for savings, including contributing to retirement funds and building an emergency fund. This ensures you are prepared for unexpected expenses and can work towards your long-term financial goals.
Is $20,000 a good amount of savings? ›
All in all, depositing $20,000 in a savings account can be wise if you have a short-term plan for the money. Your deposit will be safe and you can generate decent amounts of interest in the meantime.
