Having money in a savings account can be a smart financial choice. And to some extent, it is. You want to have your emergency fund in a savings account. If you will soon need money for a large purchase, then this also belongs to savings.

Putting the money in a high-yield savings account in these situations keeps it affordable. You can use it when you need it without penalty, while also maximizing your potential return — especially if you’re looking for the best savings account that pays a high interest rate with no fees.

However, outside of your emergency fund and savings for short-term purchases, you should forget about putting extra money into savings. Here’s why.

You can double your profit by investing instead of putting money into savings

If you have money you won’t need for a few years, there’s a much better option than putting it in a savings account, where you can potentially earn in the 4.00% range or less. That better option is a brokerage account.

Our picks for the best high-yield savings accounts of 2024

American Express® High Yield Savings APY 4.00% Price information Annual percentage yield of 4.00% from November 8, 2024 Member FDIC.	APY 4.00% Price information Annual percentage yield of 4.00% from November 8, 2024	Min. to win $0
Capital One 360 ​​Performance Savings APY 4.00% Price information Check the Capital One website for the most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of October 23, 2024. Rates may change at any time before or after account opening. Member FDIC.	APY 4.00% Price information Check the Capital One website for the most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of October 23, 2024. Rates may change at any time before or after account opening.	Min. to win $0
CIT Platinum savings APY 4.70% APY on balances of $5,000 or more Price information 4.70% APY on balances of $5,000 or more; otherwise, 0.25% APY Min. to win $100 to open account, $5,000 max APY Member FDIC.	APY 4.70% APY on balances of $5,000 or more Price information 4.70% APY on balances of $5,000 or more; otherwise, 0.25% APY	Min. to win $100 to open account, $5,000 max APY

Many brokerage accounts can be opened with no minimum balance. Once you’ve opened one, you can put your money into the stock market. You don’t need any real investment knowledge to do this either.

You can buy just one S&P 500 index fund, which tracks the performance of about 500 large U.S. companies. An S&P fund provides instant diversification, comes with low fees, and has consistently produced an average annual return of 10% over the past 50 years.

You don’t want to put your emergency fund or short-term savings into an S&P 500 fund because you need a long time horizon to minimize risk. If you have to withdraw your money for an unexpected expense at a time when the market is underperforming, you may have to cash out your investments at a loss.

A longer investment timeline gives you more time to ride out any short-term declines. If you have a few years until you need the money, choosing to earn roughly double — or more — what a savings account offers is an easy call.

If you have money that you won’t need anytime soon and you don’t already have a brokerage account, consider opening an account with Robinhood. You will enjoy easy trading right from your phone with no fees. Click to learn more and open your account so you can start making your money work for you.

CDs can offer a better return and your rate is locked in

So the market is a good option if you have an investment horizon of a few years or more, but what about the money you’ll need in six months or a year, or even two or three years?

That money often does not even belong in savings. Instead, a top-rated certificate of deposit (CD) is probably the best place for it. In the past, CDs have offered higher rates than savings accounts, and your rate is locked in for the term, so you don’t have to worry about it going down—unlike a variable rate savings account.

You do you must lock your money into a CD until maturity to avoid early withdrawal penalties. But if you know you won’t need that money for a few months or a few years, that’s not really a problem.

So there’s no reason to add extra money to a savings account once you’ve met your emergency fund and short-term savings needs. Instead, put it in a CD or brokerage account where it can do more work for you.