Best way to grow your money in 2025: Too much money in the bank could cost you big — here’s how to tell

Best way to grow your money in 2025: Cash might feel like the safest thing to have, but holding too much of it could quietly erode your wealth. While the old saying goes “cash is king,” experts warn that keeping excessive amounts in your checking account could actually work against you, as per a report.

How Much Cash Do Americans Really Keep in the Bank

According to the Federal Reserve’s 2022 Survey of Consumer Finances, the average American family held about $62,410 in their checking account, as per a MoneyWise report. For most households, that’s more cash than necessary and more than what’s financially efficient.

Why Too Much Cash Can Hurt Your Wealth Over Time

The reason comes down to what some call the “inflation tax.” As of September 2025, the average checking account earns just 0.08% in interest, as per the report. Meanwhile, the Bureau of Labor Statistics reported that annual inflation in August was 2.9% and at that rate, the money sitting in your account would lose half its purchasing power in roughly 24 years, as per the MoneyWise report.
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Smarter Alternatives: Where to Keep Your Extra Cash

But inflation isn’t the only issue. Idle cash also comes with an opportunity cost, the missed chance to earn more through investments that generate income or growth.

To combat that, some savers are turning to higher-yield options. For example, Vanguard’s Federal Money Market Fund (VMFXX) offered a 4.08% yield as of September 26, a rate that outpaces current inflation and helps preserve purchasing power, as per the MoneyWise report.For those looking beyond safety and seeking growth, a low-cost index fund may be an alternative. Vanguard’s S&P 500 ETF (VOO) has delivered a compounded annual growth rate of 14.7% since its 2010 debut, as per the MoneyWise report. While past performance doesn’t guarantee future results, it highlights the difference between leaving money idle and letting it grow.ALSO READ: 2026 Social Security raise announced — great news for some, painful reality for others

How Much Cash Should You Keep for Emergencies

Still, experts caution against draining your checking account entirely, as per the MoneyWise report. Cash plays an important role as a safety net. It’s the first line of defense against emergencies, like a sudden job loss, medical expense, or urgent car repair.

Financial advisors commonly recommend keeping an emergency fund worth three to six months of essential living expenses. To find your target, calculate your average monthly spending on necessities, then multiply by three or six, as per the MoneyWise report.

Cash management, ultimately, is a balancing act. Having too much sitting in your account can weigh down your financial growth, but having too little can leave you vulnerable when unexpected expenses arise. Finding that middle ground could be the key to keeping your money both safe and productive, as per the MoneyWise report.

FAQs

Why is holding too much cash a bad idea?
Because inflation and low bank interest rates reduce your money’s value over time.

What are better options than a checking account?
High-yield money market funds like Vanguard’s VMFXX or index funds such as VOO.