What to Do with Excess Cash: Strategies for High-Net-Worth Investors

Investment Strategy

 Deanna Orf By: Deanna Orf
What to Do with Excess Cash: Strategies for High-Net-Worth Investors
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It’s not uncommon for successful professionals and families to accumulate significant wealth only to realize that a large portion of it is sitting in cash. We often find that prospective clients may have seven figures idling after a property sale, business transaction, or concentrated stock liquidation.  

Whatever the source, best case scenario—they’ve got it in a high-yield savings account. Worst case— it’s sitting in a standard checking account, earning next to nothing in interest, which effectively means it’s losing value. 

We understand that holding excess cash can feel comforting: it provides liquidity, flexibility, and peace of mind. But when inflation, taxes, and opportunity cost are considered, that “safe” money may actually be eroding your wealth down the road. So, what’s a better strategy for all that excess cash?  

This guide will walk through how much cash makes sense to hold, where to keep it, and how to put the rest to work for your long-term financial goals.  

Step 1: Define the Right Amount of Cash to Keep  

Before deciding how to deploy extra cash, you’ll want to separate “necessary liquidity” from “idle cash.”  

Cash Buffer  

A cash buffer in your checking account prevents overdrafts and smooths out cash flow. For high-net-worth households with large monthly expenses, this might mean keeping 25–50% of one month’s living expenses in your primary bank account.  

Emergency Fund  

An emergency fund is your safety net for unexpected expenses such as medical bills, major home or car repairs, or sudden job changes. A common guideline is a fund totaling 3-6 months of living expenses.  

Maintaining this easily accessible and liquid cushion provides peace of mind and ensures you won’t need to liquidate long-term investments in the event of a sudden cash need.  

Where to Keep It  

  • High-yield savings accounts or money market accounts often provide better interest rates than traditional bank accounts while maintaining accessibility. 
  • Avoid letting your emergency fund sit in a checking account earning little or nothing.  
  • Also avoid accounts that may temporarily lock these funds away like a CD. They can (at times) come with enticing savings rates, but you'll lose access. 

Step 2: Evaluate High-Interest Debt Before Investing  

If you or your family carry high-interest debt such as credit card balances or certain personal loans, excess cash is often best deployed here first. Even affluent households sometimes maintain liabilities that quietly drain wealth. Paying off a credit card balance with 20% interest, for example, generates a guaranteed “return” far greater than most investments in the form of saved payments over the long-run. 

For those who are already debt-free or only have strategic low-interest debt, the next step is deciding how to grow excess cash in alignment with your broader financial situation.  

Step 3: Put Excess Cash to Work for Long-Term Goals  

Once you’ve established your cash buffer, emergency fund, and debt strategy, the focus turns to investing excess cash for growth. Here are a few avenues to consider:  

Retirement Accounts  

Maximize contributions to tax-advantaged retirement accounts such as a 401(k), IRA, or Roth IRA. These accounts not only grow tax-deferred or tax-free but also provide long-term compounding that helps counteract inflation and market volatility.  

As you work toward max contributions to your 401k, keep an eye on how employer contributions will factor in. 

If you’re already maximizing workplace retirement savings, consider supplemental strategies such as a health savings account (HSA)—a powerful triple-tax-advantaged tool for medical costs.  

Brokerage Accounts  

A brokerage account offers more flexibility than retirement plans, with access to a wide range of investments:  

    • ETFs and mutual funds for diversified, low-cost exposure  
    • Bonds or low-risk instruments for stability and predictable income  

Unlike retirement accounts, brokerage assets are taxable, but they offer valuable liquidity for medium-term needs or opportunities.  

Real Estate and Alternative Investments  

For some investors, direct real estate, private equity, or other alternative strategies may provide diversification. These carry unique risks and liquidity considerations, so they should be thoughtfully considered before including them in your broader financial plan. 

Step 4: Balance Liquidity, Risk, and Opportunity Cost  

Holding too much cash feels safe, but every dollar that sits idle comes with an opportunity cost. Historically, the stock market has outpaced inflation and grown wealth far beyond what cash and bonds provide 

Even accounting for periods of volatility, equities and long-term investments remain the best tool to build and sustain wealth across generations.  

The right allocation depends on:  

  • Your financial goals (retirement savings, legacy planning, philanthropy, lifestyle)  
  • Your risk tolerance  
  • Your time horizon for different objectives  

Working with a financial advisor or financial planner ensures your strategy isn’t just about “beating inflation,” but about optimizing every dollar in the context of your unique financial situation.  

Step 5: Align with a Comprehensive Financial Plan  

Excess cash isn’t just about where to park it—it’s about how it integrates with the bigger picture. A comprehensive personal finance strategy incorporates:  

  • Retirement plan contributions and distributions  
  • Education funding for children or grandchildren  
  • Tax-advantaged wealth transfer strategies  
  • Charitable giving goals  
  • Long-term investment alignment with estate planning  

By consolidating decisions under a cohesive strategy, you avoid piecemeal moves and ensure that every choice supports your vision of success.  

Conclusion: From Cash Comfort to Financial Confidence  

Sitting on excess cash feels secure—but over time, it can hold you back. By right-sizing your liquidity, addressing debts, and channeling extra money toward long-term goals, you transform idle cash into a tool that accelerates wealth and strengthens peace of mind.  

The best approach balances liquidity with growth, aligns with your risk tolerance, and adapts to your family’s evolving financial situation. If you’re unsure how to navigate this, a trusted financial advisor can help you create a customized plan that puts every dollar to work.  

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Deanna began her financial planning career in 2007 and most recently worked for a small local firm specializing in retirement income and distribution planning before joining Plancorp in 2023. As a certified financial planner, she is passionate about building relationships with her clients to deeply understand what is most important to them. Outside of work, Deanna enjoys spending time with her seven “mostly grown” children and grandson. She loves the outdoors, especially hiking, concerts in the park and sand volleyball. More »

Disclosure

For informational purposes only; should not be used as investment tax, legal or accounting advice. Plancorp LLC is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC. All investing involves risk, including the loss of principal. Past performance does not guarantee future results. Plancorp's marketing material should not be construed by any existing or prospective client as a guarantee that they will experience a certain level of results if they engage our services, and may include lists or rankings published by magazines and other sources which are generally based exclusively on information prepared and submitted by the recognized advisor. Plancorp is a registered trademark of Plancorp LLC, registered in the U.S. Patent and Trademark Office.

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