What to do With all that Cash

The “savings” account associated with your bank account is not a real savings account! It would be better named “money I cannot instantly access from an ATM”. The interest rate earned on these accounts at most all big banks is .01%. So, if you have $1,000 in your savings account, it will earn 1 cent per month. The main advantages of keeping your money in the savings portion of your account are to 1) protect against theft (which most banks insure and replace stolen funds anyways) and 2) put a control system on your own spending habits.
Your money should be earning something, even if you want to keep it in the form of liquid cash. So, what should you do with the money in your “savings” account? Put it in a real savings account. There are online savings accounts that earn around 1% interest. The cash can be transferred in and out of your checking account easily, without fees, and typically within 1 business day. See the top 5 earning savings accounts here as of February 2017. I personally use a Barclays Savings account for my cash that is just sitting in my standard Wells Fargo account.
Let’s say you have $8,000 sitting in your checking/”savings” account earning next to nothing. You want the cash on hand in case your car breaks down or just as a general safety net (ie you do not want to invest it in the markets, etc.). If you are earning 1% in one of these free online savings accounts, you will earn $8 per month on that money. Not much, but if you never end up using that $8,000 throughout the entire year, your cash made you $96 that never would have been there if you kept it in your checking/”savings” account.
If you have this kind of cash lying around, there are plenty of ways to earn a higher rate than 1%. All the time I speak with people who want cash on hand, and this is totally understandable. But you have to realize that inflation is devaluing your stagnant dollars every day if it is not earning anything. Earn 100x more than you would by keeping it in your checking/”savings” account. At least you can pay for your netflix bill every month!
A hidden benefit of this is learning how to put your dollars to work for you. Once you see your stagnant money working for you, albeit at a low rate, you will understand the concept of making the money you have your employee and watching it earn more money for you. And in this case, it is the most passive and risk free way to get a feel for how this works. In the future you should be doing this through higher paying investments, but this taste will motivate you to head in the right direction and understand the concept.
Happy Saving!

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