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• If you have too much money in your checking account, you may be missing out on valuable interest and growth.
• A checking account should contain no more than two months’ expenses.
• High-interest savings accounts, CDs and investment accounts are better suited for long-term investments.

Everyone is happy about a high bank balance – but how much is too much?

Having too much money in your checking account isn’t ideal for two reasons: First, the easy access could make you tempted to spend it. Plus, checking accounts don’t pay much interest (if any), so your money isn’t growing there. Having too much money in your checking account could mean you’re leaving money – even just a little bit – unused.

Financial planner Marci Bair of Bair Financial Planning in San Diego recommends that anyone on a fixed income have “no more than about two months’ worth of expenses” in their account at any given time.

If you have a month or two of expenses in your account and suspect you have too much, look for the following signs. If they sound familiar, it’s probably time to put money elsewhere.

1. You have no plan for your savings

If you don’t have a plan for your money, you’re probably just leaving it in your checking account and waiting to see what happens. That’s not an efficient way to build wealth.

Instead, decide how much you want to spend on each of your financial goals and set up an automatic transfer from your checking account to your savings, retirement and investment accounts each month.

A plan can help you make your dreams a reality by allowing you to save what you need and use the rest for other goals and greater growth opportunities.

2. Your emergency fund is already full

One sign that you have too much money is that you have a good thing: You’ve already built up a full emergency fund and still have money left over. An emergency fund includes about six months’ worth of expenses, kept in a safe but liquid place, such as a high-interest savings account.

After that account is set up, it can be tempting to leave the remaining money in your checking account. Bair says there are other ways to invest the money. “Put the rest into CDs and then into a balanced investment portfolio,” she says.

3. You have neglected other financial goals, such as retirement

It’s one thing to neglect financial goals when the money just isn’t there. It’s another thing entirely to neglect your goals when you have the money to achieve them. If your savings and retirement accounts aren’t growing, but your checking account is, you could have a problem.

If your checking account is growing while your IRA, 401(k) or savings account is stagnant, you probably have too much money in your checking account. Because of compound interest, time is of the essence when it comes to retirement planning (and really, savings of any kind). If you have money to save, you should put it in an account that you can benefit from as quickly as possible.

Consider setting up automatic transfers from your checking account or deducting amounts from your paycheck to help you reach your financial goals.

4. You miss opportunities

If you have a sizable checking account but aren’t taking advantage of opportunities like your employer’s 401(k) match, you may be holding on to too much cash. A match where your employer matches your 401(k) contributions up to a certain percentage is like free money, and the extra money from your checking account would be better spent in your retirement account.

Or maybe you haven’t considered another savings or investment account, such as a Health Savings Account, a tax-advantaged qualified health spending account that you can roll over year after year and use for additional retirement savings in the future. Anyone with a high-deductible health plan qualifies, and some extra money in an HSA would help you build wealth more than it would in your checking account.

5. You are afraid of missing out on money

According to the FDIC, the interest rate on an average checking account is 0.07%. That’s much lower than the typical interest rate on a high-yield savings account.

And that’s nothing compared to the 10% average annual returns in the stock market. That means a retirement account or other long-term investment account could grow even more. If you leave your money in a checking account, you could miss out on further growth. If you don’t like that, it’s time to move it.

“I have clients who think they don’t have too much in their checking account,” says Bair, “but once they see how low the interest rate is and how much interest they could get, we usually move some of it up to the next level.”

This article was originally published in March 2020.