What is the Maximum Amount You Can Have in a Savings Account?
The savings account is a core bank account that is designed to be a place where you can store your money safely while earning some interest on your balance.
Because it serves as a store for your extra cash, you might wonder how much money you can put into the account.
If you won the lottery, could you put millions of winnings in the account?
Learn about the limits on savings accounts and what you should know if you have a large balance.
The Most You Can Keep in a Savings Account
In short, there is no limit on the amount of money that you can put in a savings account.
No law limits how much you can save and there’s no rule stating that a bank cannot take a deposit if you have a certain amount in your account already.
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Banks may have limits
The only limits imposed on the balance of your savings account are the limits imposed by the bank itself.
Very few banks impose a limit on your savings account’s balance. Banks make money when you deposit your money into an account, so you’re unlikely to ever have a bank turn your deposit away.
If you do run into a situation where a bank will not accept further deposits, there’s nothing stopping you from opening an account at another bank.
In fact:
You could open savings accounts at multiple banks if you feel like it.
This could be an important strategy for the sake of the security of your savings depending on how much you have (we cover this very important topic further below).
Make More Money on Your Deposits
Though there’s no limit to the amount that you can keep in a savings account, you should carefully consider your options if you have a large amount of money to save.
When you deposit money in a savings account, what you’re really doing is making a loan to the bank. The bank will take your money and pool it with the money deposited by its other customers. The bank uses that pool of money to make investments and to lend to its other customers.
It takes the return from its investing and lending and pays some of it back to you as interest. It then uses the remainder to pay its operating costs.
If you have a large balance to deposit in a savings account, you should look for an account that pays a lot of interest.
Big banks pay little interest
Large, national banks can be convenient since they have a lot of locations. Where they fall short is in their interest rates. Because the operation of physical branches of a bank is expensive, they pay less interest. Online banks are much cheaper to run and pay far more interest than banks with physical branches.
Even if the difference in interest rate is small, it can have a huge effect over time.
Why high interest rates are important
| After X Years... | Average Savings APY at Top National Banks: 0.026% APY | Average Savings APY at Top Online Banks: 3.00% APY |
|---|---|---|
| 0 | $10,000 | $10,000 |
| 1 | $10,003 | $10,305 |
| 3 | $10,008 | $10,942 |
| 5 | $10,013 | $11,618 |
| 10 | $10,026 | $13,498 |
| Total interest earned after 10 years | $26 | $3,498 |
The longer you can save and the higher the rate you can earn, the more money you’ll have at the end of the day.
Remember to diversify
It is commendable to build a big savings account. Just remember that it is wise to diversify your money for a balanced approach to grow your wealth, as many financial advisers would recommend.
Buying a bond is like lending money to a government or the business. Bonds come with terms of months or years and can pay much more interest than a savings account. If you choose a secure bond, like a U.S. government bond you can feel confident that you won’t lose the money you put into the bond.
The downside is that you can’t withdraw money from a bond the way you can with a savings account. The tradeoff for a better return is that you have less access to your cash.
Invest for higher returns
Another option for people who won’t need their cash for a while is investing in stocks or mutual funds.
While this brings risk, you can earn a lot of money over the long-run. Adjusted for inflation, the S&P 500, (the 500 largest companies in the U.S.) returned 7% per year between 1950 and 2009.
If you invested that same $100,000 in the S&P 500 for 25 years and earned the 7% returns each of those 25 years, your ending balance would be $542,743.26. Compound interest is a powerful force, especially when you have a long time to let it work.
Know the Rules for Large Deposits
Though there’s no limit to how much you can keep in a savings account, you should know the rules surrounding large deposits to savings accounts.
When it comes to making deposits to a bank account, $10,000 is the magic number. If you want to make a deposit in the five-figure range, you’ll need to fill out some paperwork for the IRS.
While this might sound scary, it really isn’t, and it’s important that you follow the rules when making large deposits.
The law on big transactions
The reason that banks require you to fill out paperwork for large deposits is the 1970 Bank Secrecy Act. Part of the law is aimed at preventing illegal activities like money laundering or counterfeiting. The law requires that your bank submit information of any large transactions to the IRS within 15 days of the transaction.
The paperwork that you have to fill out isn’t too daunting. In most cases, you’ll just fill out a deposit slip and provide proof of identity. The bank will take care of the rest.
Never try to avoid depositing $10,000 at once by breaking the amount up into smaller transactions.
For example, taking $10,000, depositing $5,000 today, $3,000 tomorrow, and $2,000 the day after. This is called structuring and is illegal because you are attempting to circumvent the Bank Secrecy Act.
Withdrawals fall under the same rules
Similar rules apply for withdrawals exceeding $10,000, so don’t be surprised by extra paperwork when you make a large withdrawal.
In the end, don’t worry too much about these rules. At most, you’ll be asked to provide some extra information when making a deposit.
Just deposit and withdraw money from your account as you usually do, and you won’t run into issues.
Be Aware of FDIC Insurance Limits
The Federal Deposit Insurance Corporation was founded in the wake of the Great Depression to restore confidence in the US banking system. The FDIC does this by insuring consumers’ bank accounts.
FDIC insurance applies to balances up to $250,000, per depositor, per account, at insured banks.
If you have $250,000 or less in your savings account and the bank that holds the account goes out of business, the FDIC will reimburse you in full. If the account is jointly held with another person, that limit doubles to $500,000.
If your balance exceeds the FDIC limit, any amount over the limit will not be guaranteed to be returned to you.
Ways to safeguard more than $250,000
In the scenario where you have a balance of more than $250,000, there are a few ways you can keep your money safe.
Use more than one bank
If you need to keep more than $1 million safe, you can open an account at a different bank. The insurance limit is per account type, per depositor, per bank. That means you can have $250,000 in two different accounts at two different banks and they’ll both be fully insured.
Online banks and physical banks both are insured by the FDIC, so you don’t have to worry about the security of online banks.
Credit unions are not protected by the FDIC, but do receive protection from the National Credit Union Administration. The rules for the NCUA are the same as the FDIC’s.
Financial institutions with expanded deposit insurance coverage
Many banks and investment firms that target high-value customers have partnerships with multiple financial institutions to make it easy to keep your money safe.
They do this by spreading the cash across multiple banks. Internally, these institutions make sure that no one account holds more than the $250,000 limit at any particular deposit-holding bank.
You get the convenience of only seeing the main account and being able to withdraw or deposit money at one location.
Conclusion
You can keep as much money as you want in a savings account, but that doesn’t mean it’s a good idea.
0Make sure you are aware of the interest you’re earning, insurance limits, and any laws regulating your activity if you have a large bank balance.
