6 Things To Do When Your Savings Account Hits $10,000
According to a recent GOBankingRates survey, about 13% of respondents have more than $10,000 in their savings accounts. The vast majority of those polled had considerably less. Nearly one-third answered that they had $100 or less tucked away.
See: How Much Americans Have in Their Savings Accounts in 2023
Learn: How To Transfer Money From Savings Into a High-Yield Savings Account
While having a sizable savings account looks good on paper, it may not be the best use of your cash. Particularly when there are periods of high inflation, you want to make sure you are doing the most with your money. Depending on your goals, you might want to use the funds to pay off debt, invest in your future or place them in a more productive account.
Here are six things you should do if you have over $10,000 in your savings account.
Pay Off Debt
One of the first things you should do if you have over $10,000 in your savings account is pay off outstanding debt. It is of critical importance if you are carrying large amounts of high-interest credit card debt. The interest you are paying on those balances is probably significantly higher than your return on any investment.
If you don’t have large amounts of unsecured debt, you always can look to pay down your mortgage or pay off your car, assuming you have enough money set aside for emergencies.
Keep Some Liquid
While you might not need $10,000 in your savings account, it is still a good idea to keep some cash handy. One of the problems with paying off debt or investing your money is that it becomes tied up. Keeping money liquid, or easily accessible, can help you get through any unexpected financial obstacle that life throws your way.
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Once your debt is paid down and you have a fully funded emergency reserve, you can look at investing. One option is a Roth IRA. While there are income and contribution limitations, a Roth is an excellent way to fund your retirement.
The money you put in now likely will grow exponentially by the time you retire. And, unlike a traditional IRA, money earned in a Roth grows tax-free, because you fund it with money you already have paid taxes on. While there are several advantages to investing in a Roth IRA, you always should speak with a financial advisor to consider your options.
Move to a High-Yield Savings Account
If you want to have more access to your money, you can always switch to a high-yield savings account. Depending on the financial institution, you could earn up to 20% more when compared with a normal savings account. The only problem with high-yield savings accounts is that the interest earned is still fairly low and may not be enough to keep up with inflation.
Split the Funds
With $10,000 or more in the bank, you also have the option of opening a second savings account. Having two or more savings accounts can help you stay on track to achieve short- and long-term financial goals.
Start by writing down what you would like to achieve with the money. Are you hoping to take a vacation or are you saving for a down payment on a house? Most people have more than one goal, which is why having separate accounts makes sense. Maybe you keep one account as an emergency fund that is left untouched, while another account is money saved up just for traveling.
There really is no right or wrong answer. It is about discipline and devising a plan to help you be successful. The more organized you are, the better you can see where your money is going and whether you are hitting your objectives.
Give Your Kids a Head Start
Finally, if you feel financially stable and are still unsure what you should do with your money, you can always invest in your kids. Student loan debt can be crippling for a new graduate; setting up a 529 college savings plan can help your children avoid this misery. Another option would be to set up a custodial account for your kids or even a trust. There are several ways to provide for your child’s future without just giving them cash.
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