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A 2023 SecureSave survey found that 63% of Americans did not have $500 in a savings account last year for an emergency expense. So if you're sitting on $100,000 in savings, you're in a much better place -- and a pretty incredible one at that.
But you don't necessarily want to leave $100,000 worth of cash in the bank. Here's what to do once your savings balance reaches the $100,000 mark.
1. Pay off expensive debt
It's important to have enough money in your savings account to cover three to six months of essential bills. That cash should serve as your emergency fund, and you might need it to bail yourself out of a home repair or period of unemployment.
But if you're sitting on $100,000, you may have more than enough money to be covered as far as your emergency fund goes. So in that case, it makes sense to use some of your cash reserves to pay off debt that's costing you a lot of money in interest, like a credit card balance.
You shouldn't necessarily raid your savings to pay off your mortgage early if you locked in a competitive interest rate. And even if you didn't, you might still decide to keep more of your money in savings or use it for other purposes.
But there's a difference between paying 6.8% on a mortgage and paying 21.4% on a credit card balance. So if you have the extra cash, aim to eliminate as much credit card debt as possible.
2. Start investing
If you have savings beyond what you need for your emergency fund, which is likely the case with $100,000 in the bank, then it pays to invest some of that cash. While savings accounts are paying pretty generously right now, today's rates aren't the norm.
And even so, you shouldn't settle for a 4% interest rate in your savings account when you might earn 10% a year in a brokerage account . That 10% represents the stock market's average annual return over the past 50 years.
Let's say you spend $5,000 a month on essential bills and therefore want a six-month emergency fund worth $30,000. Let's say you also have $10,000 of credit card debt to pay off.
If you have $60,000 remaining in your savings, moving it into a stock portfolio could make you very wealthy over time. At a 10% annual return, in 20 years, that $60,000 could be worth almost $404,000.
3. Get a financial advisor
There's no rule stating that your savings have to get to a certain level before you can start working with a financial professional. There's nothing wrong with hiring a financial advisor to help you manage $10,000, or even less.
But once you're sitting on $100,000, it means you're in a great position to start mapping out and working toward different financial goals, whether that means buying a house, retiring early, or putting your child through college. So it's a good idea to enlist the help of a professional for guidance.
To find a financial advisor, a good bet is to ask friends and family for recommendations. Also, aim to work with an advisor who's a fiduciary.
This means your advisor must always put your financial best interests first. That distinction could impact the specific investments your advisor recommends, so it's a good one to have.
Getting to $100,000 in savings is an incredible accomplishment. Now it's time to put that money to work by paying off costly debt, investing it, and setting yourself up to fulfill your dreams.
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