How Many Savings Accounts Should I have? [Hint: It’s Zero!]

This is a short and sweet article about why savings accounts are a bad deal for the consumer and a great deal for the bank. They are mostly unnecessary. We break it down and explain why. 

Updated February 2024
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Fact checked by Cathy Gresham

savings account going down with an x over it

You don’t have a savings account? Well, let me tell you that it’s completely fine, even preferable!

These are actually terrible financial products for many people, in most situations.

I got rid of my savings account over 10 years ago when I realized how bad of a product they are and it has never been an issue ever since.

How? I use multiple, redundant ways to keep my money invested, why still being able to access liquidity when needed.

Life’s too short to save and let your money rest idle. With that being said, allow me to show you why having a savings account is too overhyped.

1. Core idea: money in savings accounts is constantly losing value to inflation

With current savings account rates well, well below inflation, if you have a chunk of money in your savings account, you are essentially locking in a loss. I actually got a mailer from a bank this week trying to sell me on a savings account “bragging” that their interest rate was 0.18% (historically inflation in the US since the civil war has been between 2-4% per year). This is also at a time when ~30% of US money in circulation was recent printed (in 2020 – 2021).

So money in a savings account is actually doing worse than just sitting idle. While maybe giving you the satisfaction of having something to draw from in case you fall on tough times, its real purchasing power is continuously declining.

No matter what, it’s not working for you when it’s just relaxing in your savings account.

So what should you do? If you are like me, here’s what you need to do to put that money to work.

Robert Allen on savings accounts

2. Instead, keep your money invested and use it as an earning asset

Instead of a savings account, invest the money you would have put into one.

Many investments, like stocks and bonds, remain liquid and you can gain sell them to gain access to your money quickly, if needed. Stocks, for example, settle in 3 days after selling. I know that money is available to me when I want it, and in the meantime, it’s invested somewhere benefiting me in the long run.

If you think you might need access to your money, or you just want the safety and security of having quick access, you’ll want to keep it in more liquid investments like stocks and bonds, instead of real estate or private equity funds. Of course, many less liquid investments can still be pledged as collateral to get access to liquidity through a loan, by using asset-based lending.  

My money is no longer just sitting in an account or an expensive safe, it’s being used to earn more money. If you’re not sure how to get started, check out our Beginner’s Guide To Investing In Stocks: Our Best Tips and Tricks.

But what should I do when I have an unseen expense knocking at my door? Don’t worry, I have your back. Read the next section to learn how you can tackle such a situation.

3. Easy example if you’re still lost

Your monthly living expenses are $3K. Conventional personal finance advisors will tell you that you need 3 – 6 months of monthly expenses in savings accounts. So $9-18K. Let’s call it $13K. Assume, on average, a 7% annual return in the S&P500 and a 0.1% savings account interest rate, that would generate, annually:

  • S&P500: $910 … not bad! Of course, this is just on average, you have to be willing to ride out the up and down years too.

  • Savings account: a whopping $13. Imagine that, $13 for getting to use your $13K for a year! And since we use a fractional reserve banking system, most banks are actually turning around and lending out around 90% of that $13K! If they charge an average interest rate of 5% then they’re making $585 in revenue using your $13K and only sharing $13 of that revenue with you!

The money invested is still yours. If you need to sell, again stock trades for example settle in 3 days, so you can still access that money quite quickly if you need it.

If you need to pay faster than that you can simply use a credit card and you won’t need to pay until the next billing cycle. Plus, you get points with most credit cards (which is why, like many people, I run as many of expenses through a card as I can even though I don’t need to, I just pay in full every month).

You can also set an SBLOC or a margin loan, which is where you pledge your investments as collateral and get a line of credit in return. You then have an additional layer of liquidity to access your cash at low rates if you want to defer paying even longer.

Closing thought: is today the day you make a change?

Are you really still wondering … how many savings accounts should I have?

Savings accounts are great for banks and terrible for you. It gives banks the capital they need to use to turn around and lend out. Meanwhile, they pay you pennies. You can easily invest your money instead and still have plenty of access to liquidity if you need it.

Editor's Note:

At Personal Finance Guru, we want to help you maximize your lifestyle through personal finance. You can trust the integrity of our independent financial advice. Our opinions are our own and have not been provided, reviewed, approved, or endorsed by any advertiser or financial product provider. To support and grow the site, however, we may receive compensation from the issuers of some products.

Meet the Author:

Cody Beecham

Cody Beecham

Founder/Owner/Editor/Author

Cody is the founder and owner of Personal Finance Guru. His day job is as a management consultant at one of the Top 3 firms (think Mckinsey, Bain), where he advises Fortune 500 C-suite clients on their most important and pressing business problems. He completed his business education at Harvard Business School. 

After seeing the lack of personal finance education for regular people, Cody started the website with the mission to provide everyone access to information that will help them achieve their financial goals.

Cody approaches personal finance from a maximalist perspective, shunning typical advice around simply not buying a cup of coffee instead of more effective methods like investing in yourself to quickly grow your income. 

He believes in saving money and investing for the future, but he also knows that you need to enjoy life today. That’s why Cody approaches money with a sense of humor and a positive attitude. He knows that if you’re not having fun while you’re growing your wealth, then what’s the point?

Cody approaches life with the same gusto that he brings to personal finance. He loves to travel and experience new cultures, and he is an avid reader and learner. He also enjoys playing sports (especially tennis) and spending time with his family and friends.