Humphrey Yang: Why You Shouldn’t Keep Too Much Cash in Your Bank
Written by
Ashley Donohoe
Edited by
Jenna Klaverweiden
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Whether you are hesitant to invest or prefer an easily accessible place for your money, you might be keeping much or all of your cash in a bank account.
While this seems like the safest option, it can also make you miss out on building wealth. After all, the national average return on bank deposits ranged from just 0.07% for interest-checking and 0.39% for savings accounts in December 2025, per the Federal Deposit Insurance Corporation.
In a recent video, financial YouTuber Humphrey Yang covered five reasons keeping too much cash in the bank hurts your finances. Also, find out what he suggested doing with your excess cash.
You’ll Spend More
Having a large bank balance can tempt you into excess spending, similarly to how giving yourself a big budget at the store can. It’s especially risky if you use one bank account for everything, including your monthly bill payments and different savings goals.
Overspending will eat into the savings you’ve got in that account, which will hurt you in the long run and make it harder to build wealth. So Yang recommended instead using a separate bucket system for your money with automatic transfers.
“Whenever you do get paid, perhaps you move a portion of that paycheck into an investment account or an emergency fund or a different type of savings account for whatever your short-term goal might be,” he said.
Your Cash Won’t Work for You
Yang said he spent his early 20s using a checking account for all his money. He explained that doing this is a mistake. Not only are you likely to earn little or no interest on that cash in the bank, but the opportunity cost of not investing money is also high.
While you might get 4% to 5% at best with a high-yield savings account, the average historical S&P 500 return is about 10% per year, per SoFi. If you invested $30,000 in cash at that return, your money would grow to around $33,000 in one year, $48,300 in five years and $77,800 in a decade, per this compound interest calculator.
If fear is keeping you from investing your cash, consider hiring a financial advisor who can help you make decisions. However, consider fees that would cut into your earnings.
You Don’t Need Too Much Excess Cash
Yang discussed the “excess cash illusion,” which relates to overestimating the amount of excess cash you need. He explained that some people keep thousands of dollars at home or in the bank, often due to distrust or concerns about financial insecurity. While some spare cash is necessary for an easily accessible emergency fund, having too much isn’t good news for growing wealth.
Yang recommended limiting your emergency savings to three to six months’ worth of cash to cover essentials like your housing payment, utility bills, debt payments and groceries. This cushion will help keep you afloat in hard times. Beyond that, Yang suggested keeping some cash for other savings goals and then investing excess cash that you won’t be using in the next five years.
You should use a high-yield savings account to maximize your return on any cash you do hold.
Inflation Hurts Your Money’s Value
The December 2025 consumer price index data showed an overall annual inflation rate of 2.7%, with several spending categories having higher rates. So even if your bank balance doesn’t change, your money’s value is usually decreasing slowly over time.
Yang illustrated this with an example: “If you have $50,000 in your savings account today, and inflation averages just 3% per year, well, in 10 years, that same $50,000 will only buy what about $37,000 buys today.”
Unfortunately, traditional checking and savings account rates won’t make up for the lower purchasing power. That’s why Yang discussed other financial products that can provide a better return than the inflation rate, such as stocks, collectibles, real estate and government I bonds.
It Could Fool You
Yang discussed how the Dunning-Kruger effect can mislead you into believing you’re a good money manager. You might assume that having much more cash than the typical American means you’re financially secure or wealthy, but that may not be the case.
“Having a lot of cash might make you feel smart, but actually being smart with money often means that you have relatively little cash because it’s all deployed strategically,” Yang said.
Instead, he recommended using different indicators to assess your financial progress, including your asset number and net worth. Also, he suggested periodically reviewing your cash balances to ensure you don’t hold too much.
More From GOBankingRates
