MW Your emergency fund might be too big. Here's where to put your extra cash.
By Genna Contino
Cash is the most expensive place to hold any excess savings
People instinctively hoard cash during times of economic volatility - but experts say too much cash could actually put you at a financial disadvantage.
If you already have the equivalent of three to six months of expenses saved for emergencies, financial planners have a message for you: Anything beyond that shouldn't be sitting in cash. But that advice is easier said than done, especially when markets are volatile and global tensions are running high.
Nearly half of Americans (45%) expect the economy to weaken in 2026, Northwestern Mutual's annual planning and progress study found. The survey was conducted in January, before the U.S. and Israel began their war with Iran, and financial planners say they have seen an uptick in clients looking to pad their emergency funds since then.
Saving more is a natural response to economic uncertainty, and it's a good habit to form. But people's natural instinct is to hoard those savings in cash - and "the problem with cash is it's the most expensive place in the marketplace to hold our dollar," said Northwestern Mutual wealth-management adviser Ashley Russo.
"Someone works really, really hard for the dollar, they park it in cash and the dollar doesn't work hard for them," Russo said. "It's like earning $30 per hour, but then you're paying $35 for parking."
Here's how to tell if you have too much savings in cash, and what to do about it.
'It's really dependent on your goals'
To be clear, Russo still thinks it's important to have a minimum of three months' worth of expenses in easily accessible money to keep you afloat in case of job loss or a health-related emergency. And during times of economic uncertainty, or for people who work in an industry where jobs are not secure, that advice leans more toward six months' worth, she noted. That's especially true now, as the average amount of time it takes an unemployed person to find a new job has ticked up to almost six months as of February.
Read more: U.S. stocks are faring worse than during past geopolitical shocks - and there's plenty of room for them to fall further
But supersavers who have more than six months' worth of expenses to spare should be intentional with where that money is going, said Brandon Goldstein, a New Jersey-based financial planner at Prudential $(PRU)$. And advice for where that money should go is different for everyone.
"The younger you are, on a retirement account, you could probably take more risks than somebody who's older that's going to retire next year and might be dependent on the money," Goldstein said. "But with that being said, you might be looking to buy a house next year. It's really dependent on your goals."
Goldstein recommends starting by breaking your goals down into three buckets for the short, intermediate and long term.
From the archives (Nov. 2025): Supersavers who can put $72,000 in their 401(k)s in 2026 should make this smart 'mega' Roth move
The first step, he said, is simple: Look at your bank statement and check your interest rate. Your short-term bucket - that liquid emergency fund you can tap immediately - should be in an easily accessible account. Many big banks still offer savings accounts at 0.01% - meaning a $10,000 emergency fund earns next to nothing in interest. Shopping around for an FDIC-insured high-yield savings account, many of which currently offer around 4% returns, can make a meaningful difference over time without sacrificing the liquidity you need.
For the portion of savings just beyond that - money you're less likely to need immediately - CDs, or certificates of deposit, are another option worth considering. Unlike a high-yield savings account, CDs lock your money in for a set term - anywhere from about one month to 10 years - in exchange for a guaranteed return. CD rates vary based on their terms, market conditions and the banks offering them. For example, a one-year CD at Capital One $(COF)$ currently has a 3.75% APY.
For intermediate goals like a home renovation, Goldstein said, a CD "laddering strategy" can make sense. That means spreading money across CDs with staggered maturity dates, so that every few months a new one comes due. The returns won't be dramatic, but it's a guaranteed, government-backed way to outpace a standard savings account while keeping funds accessible on a rolling basis.
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Russo categorizes CDs as cash, but they can be a smart parking spot for savers who want certainty without market exposure, particularly right now. Since the end of February, consumer interest in CDs has surged; Raisin, an online savings marketplace, has seen about 40% more new customers seeking CDs as of mid-March.
"CDs in particular stand out because they lock in a guaranteed return, making them a place people can sit out volatility while still earning a competitive yield," Raisin CEO Alastair Wood said.
Saving for long-term goals is where you can build in more risk. "Long term, we're going to invest a little bit more aggressively because even with all the craziness with the market, historically, it doesn't take more than a year and a half to recover," Goldstein said. The further you are from needing that money, the more volatility you can afford to stomach in exchange for a higher return.
Read more: Here's how much money Americans say they need to retire. $1 million isn't enough.
For retirement specifically, tax-advantaged vehicles like a 401(k) or Roth IRA can help shield more of those gains from the IRS. The right choice between them depends largely on what tax bracket you expect to be in when you retire - a question worth researching or working through with a financial planner.
While it takes some effort to figure out where to redirect extra savings, people who have oversaved can count themselves as lucky. The majority of Americans (53%) don't have enough cash on hand to cover a $1,000 emergency expense, according to a 2026 Bankrate survey - a problem exacerbated by inflation squeezing household budgets.
The through line across all levels of saving, both planners said, is intentionality. "Every dollar must have a job description," Russo said.
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-Genna Contino
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April 02, 2026 08:30 ET (12:30 GMT)
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