According to financial experts, it could mean that you're missing out on valuable interest and growth.

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So far, your savings journey has really flourished into a prosperous savings account. After all, you have set (and stuck to) personal savings goals, started a 401(k), and automatically set a specific dollar amount aside from each paycheck. In other words, your savings account has really grown.

However, is there such as thing as saving too much inside one savings account? The answer may surprise you. "There are many reasons to build your savings, but financial security is at the heart of all of them," says Poulomi Damany, financial specialist, general manager at Credit Karma Money and Tax. Instead of depositing all of your money into one account, you should divide your savings into thirds, which Damany describes as an everyday savings account, emergency fund, and retirement fund. Here, we explain why this matters and when you are accumulating cash without strategy.

business woman county money at table
Credit: Sheviakova kateryna / Getty Images

You always have a balance in excess of your monthly expenses.

Everyone enjoys seeing that figure in their checking account, but how much is too much? As it turns out, accumulating cash in your checking account isn't ideal for two reasons: First, this easy access means you might be tempted to spend it. Secondly, checking accounts don't earn much (if any) interest, so you're missing out on long-term growth. This is why it's important to own an everyday savings account—think of this as a space for peace of mind knowing you can afford a larger expense than you could pay for spending just your monthly income; and remember to implement the 50/30/20 rule of saving.

Your emergency fund is too high.

An emergency fund is just as it sounds: It's a place to save money for unexpected expenses or a financial crisis. Generally, your emergency fund includes three to six months' worth of expenses stored somewhere safe but liquid, like a high-yield savings account. After this account is built, it can be tempting to leave any spare cash in your checking account but this means you'll miss out on other investment opportunities.

You've been neglecting your retirement fund.

A retirement fund is the third place where money should be separated from your general savings account and your emergency savings account. Building up this account is essential to ensuring a secure financial life when retired since you'll no longer be earning an income.

Damany suggests calculating how much to save by factoring in your savings goals and everyday expenses. By being financial literate with all three accounts can reduce the odds of accumulating debt by allowing you to use reserved cash as opposed to loans and credit cards. Damany adds that paying for needs as opposed to wants can also determine how much to save in each of your savings accounts.

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