Have you recently received an inheritance, sold a property or business, or have a high-income job with most of your money sitting in a savings account? While keeping it in a bank may seem like the safest, most sensible choice, holding a lot of cash in one institution carries risks of its own. If you’re not sure what to do with cash, that is ok. We can help. A Morgan Rosel Wealth Management financial advisor can create a strategy to invest a lump sum of cash that will not only help protect your wealth, but give it the opportunity to grow. Keep reading to see why we don’t recommend keeping large amounts of wealth in a single savings account and discover options for what to do with cash instead.

1. Bank Accounts Are Not Insured Past $250K per Person

    If you’re wondering what to do with cash and have a significant amount sitting in a single savings account, it might be because you aren’t sure how to invest it and you’re worried about losing it. Banks are safe right? So why not keep it there? Many people are not aware that bank accounts are only insured up to $250k per person by the FDIC. In early 2023, multiple banks collapsed, and many people had over $250k in their accounts. The FDIC decided to cover all deposits, regardless of size, in order to prevent a wider crisis. Those people were lucky. However, the FDIC is not a bottomless pit of money. If more banks collapsed, it could become increasingly likely depositors would lose their uninsured deposits. 

    One option that wealth advisors suggest is to open additional bank accounts with different institutions. This allows you to diversify your exposure and reduce risk by spreading your funds around multiple institutions and keep them within the FDIC insurance limits. Another option is to invest your money in other low-risk options, such as money market funds, treasury bills, or CDs. CDs have finally started paying better interest rates than most bank savings accounts. Not sure the difference between CDs and savings accounts? Check out this article.

    2. Inflation Eats Away at the Value of Your Savings

    Inflation decreases the value of every dollar in your savings. When inflation is at the Fed’s target of 2%, the impact may not seem like much. However, during 2022 and early 2023, inflation was at its highest point in years. Cash stored in savings accounts had its purchasing power decrease by up to 9% annualized during that time period. If you were unsure of what to do with cash and held it in a savings account, the amount your cash could buy decreased significantly.

    As long as savings accounts are paying interest at less that the rate of inflation, the purchasing power of your savings will continue to dwindle. While there’s no foolproof way to protect your cash from inflation, there are many different options financial advisors would suggest you take to make the most of your lump sum of money. During periods of high inflation, financial planners will likely suggest a diversified investment strategy that includes assets like stocks, inflation protection bonds, and short-term treasuries. If you’re not familiar with these options, reach out to a private wealth management firm like Morgan Rosel Wealth Management for financial planning expertise and investment advice.

    3. Opportunity Costs

    There are always going to be tradeoffs to consider when deciding what to do with cash. For example, if you keep a large lump sum of money in a savings account, the opportunity cost is that it could be growing faster someplace else.

    Historically other investment vehicles have provided much higher returns that have outpaced inflation. However, there is always the risk of loss as well. With the help of a wealth advisor, you can build a wealth strategy that works for you and gives your money the opportunity to grow. It ultimately boils down to your risk tolerance, financial goals, and time horizon. So, before making a decision, weigh your options carefully and consult with a financial advisor.

    If you’re not sure what to do with a lump sum of money sitting in a savings account, we recommend reaching out to a CERTIFIED FINANCIAL PLANNERTM and investment advisor such as Morgan Rosel Wealth Management. Our experienced wealth advisors in Highlands Ranch, CO are here to help. We will consider your risk profile, goals, and the opportunities available in the market, in order to provide you with expert guidance and trustworthy knowledge. Let your wealth start doing the hard work. Schedule a consultation with a Morgan Rosel Wealth Management wealth advisor today.

    This commentary reflects the personal opinions, viewpoints and analyses of the MorganRosel Wealth Management, LLC (“MRWM”) employees and guests providing such comments, and should not be regarded as a description of advisory services provided by MRWM or performance returns of any MRWM Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. MRWM manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. MRWM may recommend the services of a third-party attorney, accountant, tax professional, insurance agent, or other specialist to clients. MRWM is not compensated for these referrals.