If you’ve dealt with a financial professional in the past, you’ve likely heard that you shouldn’t start investing until you’ve built up an emergency fund. Emergency funds are there for – you guessed it – emergencies, either in the case of a lost job, unexpected expense, or some other hardship in your life.

Most experts agree you should have somewhere between 3- and 6-months’ worth of expenses held in savings to support an emergency fund. In the case of a job loss, for example, having this money available allows you to live comfortably while looking for a new job or scoping out other options.

But what happens if you decide to save more than the recommended amount? What if you never stop saving? Does it even matter?

Americans Have Trouble Saving In General

To determine whether or not it’s possible to save too much money, we first need to figure out why some people have trouble even getting started.
According to the U.S. Bureau of Labor Statistics (BLS), the average salary in the United States is $56,310. When the average monthly expenses for a single person hover around $3,200 a month, if we stick to the aforementioned 3-6 months’ worth of expenses, you would need to save between $9,600 and $19,200 to meet recommended levels.

Saving six months’ worth of expenses seems like a tall order, and for some Americans, it is. Only about 4 out of 10 Americans today say they would be able to afford an unexpected $1,000 expense, making it difficult to put money aside for emergencies. However, once you’ve been able to put the first $1,000 away, it starts to become muscle memory.

$92,000

Average American’s debt, in dollars

Americans also suffer from high debt. According to Bankrate, the average American has more than $92,000 of debt, meaning they likely can’t even begin fully saving until they’ve paid off their obligations. Unfortunately, even if you’re keeping your money in the highest-earning savings account, you’re likely still not coming close to matching the interest rate of a standard loan. This is why it’s important to pay down whatever debt you have before setting your sights on saving as much money as possible.

How Much Is Too Much?

Let’s say you’ve paid your debts and established an emergency fund. What’s the harm in saving as much money as possible for as long as you can?

Although there isn’t a specific amount of money you need to have in your savings account to feel comfortable, stashing money away without a financial plan could end up hurting you in the long run.

Ideally, you should have a savings plan in place that covers every base and builds toward investing so you can build wealth better over time. Think of your financial plan as four buckets that need to be filled, or at least not empty. These four buckets are for:

• Managing your bills and paying down debts
• A little fun money fund for life’s simple pleasures
• Savings for an emergency or rainy day
• Investing for the short- and long-term

If you keep saving without a plan and goals, you could miss out on your money working for you through investing, which could yield better returns over time compared to simple savings.

So, you have a fully-stocked savings account. What now? Do you just keep growing your savings? How do you know when it’s too much?

It’s simple. Despite having the ability to manage your bills and debt obligations and treating yourself from time to time, you might not be saving wisely. Consider shifting your focus from maintaining and saving to building wealth with investing and compound returns.

What to Do With Your Savings Instead

The point is there can always be too much of a good thing. There are much better ways to grow your wealth than by burying it in a savings account. Investing your extra savings can be a great option!

Apps like Beanstox simplify investing, allow you to automatically invest your extra money into ETFs weekly, monthly, or however often you choose. Typically, the stock market has grown by an average rate of 6-8% annually over several years, and the longer you stay invested, the more opportunity you have to earn dividends, compound returns, and grow your nest egg.

Long story short, saving money is awesome and we encourage you to do so. But, just like everything else in life, do it wisely. Take stock of your finances and determine where your limits are. Once you’re comfortable with your emergency fund and your debts are in a manageable place, set your sights on growing your wealth through investing.

And don’t forget to spend some money on yourself as well. It will make you happy and can create even more positive outcomes.