11 Surprising Reasons To Stop Putting Money in a Savings Account

A savings account is a very safe place to keep your money because it's insured by the FDIC. The US government guarantees you will not lose access to your money. 

And, depending on your bank, you can also earn interest on that money while it sits in your account.

However, a savings account is not a great way to build wealth, and having too much money in a savings account might be costing you.

Did you know there are alternatives to savings accounts that are just as safe yet aren't subject to as many taxes? 

Take a look at these 11 reasons why you may be making a mistake by keeping all of your money in a traditional savings account.

Your bank can lower the interest rate you receive. If you prefer a guaranteed interest rate, consider a safe alternative such as a Certificate of Deposit (CD). This way you will always know exactly how much your money is earning while it sits in your account.

Your job may offer an Emergency Savings Account (ESA), where your money is automatically moved from your paycheck to an emergency fund.

This is an easy decision to opt-in if your employer matches your contribution, because that's essentially free money that your boss will be putting into your ESA for you. As an added bonus, you'll get to keep all the money, even when you no longer work for the company.

If you work for a company that matches your 401(k) contributions, you are greatly incentivized to stash money into this retirement account, as well.

You can also save money on taxes by contributing to a 401(k). This can be a better option than a savings account for money you don't need to access right away.

Do you want to be charged to keep your savings in the bank? Unfortunately, that's exactly what can happen with certain savings accounts.

You should check that your bank doesn't charge savings account holders fees, as some of them can eat into the money you have stashed away.

The IRS requires you to pay taxes on the interest you earn from your savings account. That means you'll need to cut Uncle Sam a check each April. Instead, you may want to consider alternatives that won't force you to pay state or local taxes on the interest you earn, like Treasury bills.

Good is the enemy of Great. While savings accounts are a very safe place to store your money, you could be potentially missing out on earning much more money by investing in stock market index funds.

Yes, you can lose money in the stock market. But you can also lose money in a bank account due to inflation outpacing your interest rate.

A savings account is a good place to stash money you may need in the short term, but it may not always be a great place to grow your money in the long term.

If your housing costs and medical bills stayed exactly the same each year, a savings account might be the best place to store the bulk of your money.

However, we all know that costs keep rising. And with the lower rates offered by banks, you'll be lucky if the interest you earn can keep up with those increasing expenses.

Consider accepting a bit more risk in order to earn more money from your savings. This might lead you to invest in mutual funds, index funds, bonds, property, and more.

Money market accounts typically offer better interest rates compared to savings accounts. Money market accounts are also backed by the FDIC, so your money is protected by the U.S. government.

Of course, you can't access your money market accounts quite as easily as walking into your local bank, so it may not be a good fit for everyone.

A cash management account is similar to a checking account, yet you earn interest like a savings account. The difference is that you keep your money at a brokerage or investment firm instead of with a bank.

Instead of managing separate checking and savings accounts, you have a one-stop shop where you can pay your bills, invest money, and earn interest. Of course, just like other non-bank options, you can't simply walk into your local branch in an emergency, so this may not be a good fit for everyone.

Another good idea for long-term investors, the Series I savings bond can be a great place to stash your savings that will get you way better returns.

Check the current interest rate on the Series I savings bond — it changes every six months based on inflation — because you may find it to be similar to or better than most savings accounts. But, even if rates are the same, a big advantage to I-Bonds is that you don't owe state or local income tax on the interest.

You can redeem your I-bond after 12 months or let it sit and continue to collect interest.

A savings account is one of the safest places to park your money. But this is not a way to retire in style or financially upgrade your lifestyle.

If you have knowledge of the collectibles market, cryptocurrency, artwork, or particular stocks, you can turn what you know into big financial gains. But, you should never risk money you can't afford to lose.

It's smart to follow the conventional wisdom of keeping 6 months' expenses in an emergency fund where you can access the money quickly. A savings account is a viable option. But keeping much more money in that account may be holding you back.

What if you invested some of those funds into education that advances your skill set? There's a limit to how much money you can save. There's no limit to how much money you can earn when you have the right skills.

Savings accounts are useful, but keeping all of your money in them could be a surprising financial mistake when you consider how much money your savings could be earning elsewhere. Look into safe alternatives such as CDs, money market accounts, and Treasury bills.

Then, once your savings has grown, you can investigate higher-risk/higher-reward options such as index funds and real estate to build your wealth further.