Finance

American families are hoarding huge amounts of cash, but leaving money on the table. Here's why, and how to make it all back

Moneywise · Jul 16, 2026 10:15 · 6 min read

How much cash should you keep on hand?

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Cash is king, right?

Well, not always. Sometimes you can have so much cash sitting around in your bank account that it turns into a wealth-devouring demon.

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On average, American families had about $62,410 in their checking accounts, according to the Federal Reserve’s 2022 Survey of Consumer Finances (1). For most people, that balance is simply higher than it should be.

The key culprit for burning through that balance? Weak interest rates on your liquid cash coupled with sticky inflation.

Legendary investor Warren Buffett has warned of the devastation that inflation can wreak on your money for decades, including back in 1977 (2).

"The arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislatures,” Buffett explained in an interview with Fortune. "The inflation tax has a fantastic ability to simply consume capital ... If you feel you can dance in and out of securities in a way that defeats the inflation tax, I would like to be your broker — but not your partner."

Here’s why keeping too much cash on hand could be a serious mistake and a significant drag on your financial health.

The inflation tax

As of June, the average national deposit rate on a checking account is just 0.07%, according to the Federal Deposit Insurance Corporation (3). That’s nowhere near enough interest to offset the rising cost of living.

Meanwhile, inflation was up 4.2% before seasonal adjustments over the past year, according to a June 10 report by the Bureau of Labor Statistics (4). That means the average checking account is earning approximately 60 times less than the rate of inflation.

But inflation isn’t the only problem. Idle cash also carries opportunity cost: that's the money you leave on the table when you don’t invest in assets that can generate income or growth.

What to do with cash instead

To fight inflation, consider moving some of your money into short- or medium-term securities with higher yields.

For example, Vanguard’s Federal Money Market Fund (VMFXX) offered a 3.58% yield as of late June (5). Although this is still below the rate of inflation, it’s still a lot better that 0.07%.

If you’re more concerned about opportunity cost, you might look into a low-cost index fund with higher risk – but also, the potential for higher returns. Vanguard’s S&P 500 ETF (VOO) has delivered a compounded annual growth rate of 14.84% since its 2010 debut (6). And although past performance does not guarantee future returns, the point stands: keeping cash idle means missing out on growth potential.

You can easily invest in assets like VOO when you use platforms such as Acorns, an app that automatically invests your spare change

Signing up takes just minutes: Link your cards and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio. That morning coffee for $3.25? It’s now a 75-cent investment in your future.

With Acorns, you can invest in a dividend ETF with as little as $5 — and, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey. All you have to do is set up a small recurring monthly contribution to snag the bonus.

Another option for preserving your wealth is gold, which is often considered an inflation-resistant investment. The thinking goes like this: Unlike fiat currency, gold can’t be printed at will and has an inherently limited supply. Investors alsooften buy gold during periods of high inflation. In turn, this can increase demand and drive up the spot price.

Opening a gold IRA with the help of Goldco allows you to invest in gold and other precious metals in physical forms while also providing the significant tax advantages of an IRA.

With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Plus, the company will match up to 10% of qualified purchases in free silver.

If you’re curious whether this is the right investment to diversify your portfolio, you can download your free gold and silver information guide today. Just keep in mind that gold is often best used as one part of a well-diversified portfolio.

However, none of this means that you should drain your balance completely. There’s still a healthy amount of cash you’ll want to keep on hand — especially for when things get tough.

How much cash should you keep?

Cash remains your best source of emergency funding. If you suddenly lose your job, face an unexpected medical bill or need a quick repair on your car, you’ll want easy access to at least some of your wealth.

Most financial advisors suggest keeping an emergency fund worth three to six months of essential living expenses. To find your target, total up what you spend on necessities in an average month, then multiply accordingly.

Another approach is to multiply your after-tax monthly income to build a short-term buffer if you lose your job.

A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering both competitive interest rates and easy access to your money when you need it.

A Wealthfront Cash Account currently offers a base APY of 3.30% through program banks, and new clients can get an extra 0.75% boost during their first three months on up to $150,000 for a total variable APY of 4.05%.

That’s about ten times the national deposit savings rate, according to the FDIC’s May report.

Additionally, Wealthfront is offering new clients who enable direct deposit ($1,000/mo minimum) to their Cash Account and open and fund a new investment account an additional 0.25% APY increase with no expiration date or balance limit, meaning your APY could be as high as 4.30%.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, you get access to up to $8M FDIC Insurance eligibility through program banks.