Everyone needs a savings account. It's the safest place to keep your cash, and it can even earn you a lot of interest if you shop around for a high APY.

But there is such a thing as having too much money in savings. In fact, there are cases where keeping too much money in savings could cost you money in the long term.

Here are three of them.

1. You have more than enough cash to cover an emergency and near-term purchases

A savings account is where you want to keep your emergency fund, as well as any money you're setting aside for big purchases you plan to make within the next few years.

Our Picks for the Best High-Yield Savings Accounts of 2025

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.70% Rate info 3.70% annual percentage yield as of March 10, 2025. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.70% Rate info 3.70% annual percentage yield as of March 10, 2025. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
CIT Platinum Savings Member FDIC. APY 4.30% APY for balances of $5,000 or more Rate info 4.30% APY for balances of $5,000 or more; otherwise, 0.25% APY Min. to earn $100 to open account, $5,000+ for max APY Open Account for CIT Platinum Savings On CIT's Secure Website. Member FDIC.	4.30% APY for balances of $5,000 or more Rate info 4.30% APY for balances of $5,000 or more; otherwise, 0.25% APY	$100 to open account, $5,000+ for max APY	Open Account for CIT Platinum Savings On CIT's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.70% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Feb. 6, 2025. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.70% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Feb. 6, 2025. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.

An emergency fund is meant to cover big, unexpected expenses or a period of unemployment. Ideally, you have enough money set aside to cover three to six months' worth of expenses. This is well-worn advice for good reason. If you suddenly lose your income, or you need to repair your car or your roof, then you'll be able to pay the bills without going into debt.

A savings account is also a good place for money you're planning to spend within the next five years or so (not including your usual expenses). If you're saving up for something like a wedding, a vacation, or a new car, then keeping those funds in a savings account is a smart idea.

Beyond that, however, you probably want to start putting your money to work by investing it.

2. You have high-interest debt

If you have high-interest debt like unpaid credit card bills, then paying it off should be your top priority. Even the best savings accounts don't pay interest rates anywhere near the APR of a credit card.

So long as you have high-interest debt, you'll be swimming upstream. The interest you pay will eat up your income and wipe away the earnings on your savings and investments.

That's not to say you should completely drain your savings to pay off your credit cards. You still want a cash cushion in case some big expenses crop up. But if you can put a dent in your debt while leaving enough in savings to cover at least a couple months' worth of expenses, then it's probably the best move.

A balance transfer card could give you up to 21 months to pay off debt at 0% intro APR. If you're struggling with high-interest debt, check out our list of the best balance transfer cards and see if you qualify.

3. You have little or no retirement savings

Investing for retirement is essential, no matter your age or financial situation. If you have a lot of money in savings but very little in a 401(k) or individual retirement account (IRA), then consider investing more of your cash for the future. Even if you don't have a lot of money in the bank, you should aim to put some of your income into retirement savings ASAP.

Here are two reasons why.

The earlier you invest, the more money you can make

Let's say you put just $100 a month into an IRA and invested that money in an S&P 500 index fund. These funds track the performance of the S&P 500 Index, which represents 500 of the biggest companies in the U.S. Historically, this index has gained 10% per year on average, but we'll be conservative and assume it earns 7% per year.

Here's how much your investment would grow over time.

You can see how your investments grow exponentially over time. The money you invest now will earn far more than the money you invest years from now.

401(k)s and IRAs offer huge tax breaks

Not only do retirement accounts allow you to invest in high-growth assets like stocks and bonds, but they also come with big tax benefits.

Investments held in a regular brokerage account are subject to capital gains tax and dividend tax. When you sell investments that have gained value, you'll likely pay capital gains tax on the earnings. Any dividends you earn throughout the year can be taxed, too. The rate varies based on your income, but most people will pay 15%.

Investments held in a 401(k) or IRA are not subject to either of these taxes. When you retire and start selling investments for income, those tax breaks could save you huge sums of money.

Ready to invest for your future and save a fortune in taxes? Check out our list of the best IRA brokers and open an account today.