Can your cash be doing more?: The Truth About Money^®

If you've been focused on rising borrowing costs, you may have overlooked an upside for savers: Cash has become a more meaningful part of financial strategy. Savings accounts, money market funds and CDs are generally offering stronger yields than many people were accustomed to during the years of near-zero interest rates.

But that doesn't mean every savings account is helping your money reach its potential. Depending on where you're keeping your cash, you could be earning considerably less than what's available elsewhere. Reviewing your cash strategy periodically can help ensure you're balancing yield, access to your money and safety.

Whether you're building an emergency fund, saving for a major purchase or simply maintaining cash reserves, today's environment offers opportunities to put idle cash to work without sacrificing liquidity.

What cash reserves should you have?

The amount you should keep in cash reserves depends on two factors: your monthly expenses and the stability of your income. You should also consider whether you have any large one-time expenses coming up, such as a vacation, a new car or a wedding to pay for.

All told, your cash reserves should equal somewhere between six and 24 months' worth of spending, depending on how stable your income is.

Your cash reserves should provide you with quick and easy access to your money, otherwise known as liquidity. You want to be able to draw funds without a waiting period, and with minimal taxes or fees. With that in mind, let's look at the options for higher-yielding accounts.

Money market funds

A money market fund generally offers better rates than a regular savings account. Rates can vary widely, though, with an average rate between 0.63% and 4.38% annual percentage yield (as of August 2026), depending on your balance. Money market funds typically invest in short-term, high-quality securities and are generally considered conservative investments. However, unlike bank savings accounts, they’re not FDIC insured and can lose value, although money market funds have historically sought to maintain a stable share price. Money markets require a higher initial deposit, but many banks offer a linked account with your checking, and often for a lower fee.

High yield savings accounts

As of August 2026, a high-yield savings account can earn around 4.38% APY compared to just 0.38%, the average rate on regular savings accounts. Among the options discussed here, high-yield savings accounts generally provide the greatest level of principal protection, provided the institution is FDIC insured. High-yield savings accounts no longer require a higher starting balance, are federally insured up to $250,000 per depositor, and should provide easy access to your funds for a reasonable fee. Don't forget online options – these often offer better APY and lower fees than traditional banks.

Certificates of Deposit

Unlike regular savings accounts, most CDs have fixed rates, so you can lock in a higher rate while it lasts. If you have a low-interest CD coming due, this higher-interest-rate environment is a good opportunity to boost your potential yield by switching into a new CD with a higher rate. Like savings accounts, CDs issued by FDIC-insured banks are federally insured up to applicable limits. The primary tradeoff is not investment risk, but reduced access to your money for the length of the CD term. Unlike high-yield savings accounts and most money market funds, you can't touch the money for the duration of the term, so it's important that you think carefully about how much money you can set aside for that length of time. Keep an eye out for minimum deposit requirements and any penalties for early withdrawal. And remember, anything with a maturity of more than one year doesn't count as a cash equivalent.

Where not to keep cash reserves

There are some investments that you should not consider to be "cash equivalents," because either they take too long to provide access to your money, or the fees and penalties can be prohibitive and end up costing you money. These include CDs with terms of longer than 12 months, U.S. Treasury notes and bonds – not because they're not good investments, but because the time to maturity (two to 10 years for notes and 20 years or longer for bonds) is too long for them to count as cash equivalents. Life insurance cash values are not suitable for use as reserves either, because of potentially large surrender penalties, tax risks and other restrictions. Other options you should avoid include cash positions in a managed portfolio, commercial paper, fixed annuities and Treasury Inflation-Protected Securities or TIPS.

Make the most of your cash reserves

No matter which higher yielding account you set up, there are two general rules to keep in mind: 

1. Always check the FDIC-insured amount. Limits set by the FDIC are for each depositor, not each separate account, so keep an eye on your total assets held by any one institution. 
2. Add a beneficiary to your accounts. Be sure to ask for and fill out a Payable on Death form for your accounts, so they automatically pass to your beneficiary and won't end up in probate.

The right cash strategy isn't just about chasing the highest rate. It's about balancing yield and liquidity so your money is available when you need it. Periodically reviewing where you keep your cash can help ensure your reserves continue to support your broader financial plan.