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Illustration for article titled How to Know if There’s Too Much Cash in Your Savings Account
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As our country wrestles with new coronavirus outbreaks, the economy continues its downward slump. This week’s announcement from the Federal Reserve was bad news for savers—who may already be antsy about low interest rates and where to stash their cash, according to a new Bloomberg report.

While millions of Americans have suffered from job loss, coronavirus lockdowns have boosted savings for others. A recent Betterment survey found 40% of those surveyed saved their first stimulus check, and one-third have the same plans for the second payment.

Personal savings rates spiked to a high of 33.5% in April and have stayed in the double digits ever since. We haven’t seen rates like these since May 1975, when savings rates spiked to 17.3% at the end of the early 1970s recession.

There’s a problem, though: With the Fed keeping benchmark interest rates near zero, it’s been difficult to find competitive savings rates. The national average for savings accounts is only .06% and online-only banks have been hovering around 1%. While it’s tough to argue against more savings—especially in a shaky economy—there may be a point where it’s time to focus on your other financial goals.

How much to keep in checking and savings

If you have been lucky enough to save money over the past five months, you may be wondering how much savings is too much. The answer is: well, it depends. During periods of uncertainty, you may prefer an extra cushion of savings, particularly if you or your partner’s job are less stable. There are a couple of rules of thumb experts recommend, though.

“With the ongoing economic crisis, effectively managing your cash is more important than ever,” says Corbin Blackwell, a certified financial planner at Betterment. She recommends keeping three to five weeks of living expenses in your checking account, and at least three to six months in savings.

Once you meet these benchmarks, Blackwell recommends steering clear of your savings account. For example, depending on your family’s goals, you may invest more for your retirement, kids’ college education, or a one-time expense like a home downpayment.

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