What to Do With That Extra Cash in Your Checking Account
Because of inflation, that money is losing purchasing power, so don’t let it sit on the sidelines. Here are three ways to put it to work for you.


Many people are wary to invest, but if you have extra cash sitting around, you can still make it work for you.
In the latest Quarterly Market Perceptions Study from Allianz Life, just 19% of Americans said they are comfortable with current market conditions and ready to invest now. That is down from 26% last quarter and 29% at this time last year.
What’s more, 64% said they would rather have their money sit in cash than endure market swings.
This feeling is likely driven by worry about market volatility and the risk of a recession. The majority of Americans (77%) said they think the market will continue to be very volatile in 2023. And 62% said they worry a major recession is right around the corner.
Listen, don’t have your money just sit in cash on the sideline not working for you. Instead, consider making decisions that can set you up for a more secure financial future. Financial consultants recommend that you have up to three months’ worth of expenses in cash set aside as an emergency fund — this is likely sound advice and not the cash we’re discussing here.
The risks posed by inflation or a prolonged market downturn are real. And for people approaching or in retirement, the tolerance for risk is likely lower than those who have years ahead to rebuild their portfolio if a recession hits. But, leaving money in cash doesn’t address one of Americans’ largest concerns these days — inflation. With today’s inflation, you are likely losing purchasing power letting your money sit in an everyday checking account.
Here are three things to consider doing with your money instead.

1. Pay Off High-Interest Debt.
Investing inherently has risk. And maybe these days, your tolerance for new risk is zero.
Cash that is sitting in a checking account could be used to pay off high-interest debt. That way, you’re still bettering your financial future without taking on new risk. By proactively paying off high-interest debt, you will reduce the amount you will pay in the long run.
High-interest debt is usually considered anything with a higher rate than a mortgage or federal student loan. So, credit cards with interest rates around 15% or a private student loan with a 12% interest rate would both be considered high-interest debt. Paying off a credit card with a high interest rate will reduce the total amount you will pay over time by avoiding future interest.

2. Limit Your Exposure to Market Risk.
You might be thinking that you’ll invest that cash at a later date. Maybe when you think the market has bottomed out, or the volatility has subsided. This might be a bad idea — trying to time the market has historically been a failure. The bulk of gains made during a market recovery will happen on just a few trading days at the beginning of the recovery. That means, if you time it wrong and miss those days, you will be behind.
You can take part in the market and limit your exposure to risk. You can invest in stocks that are less volatile than the market as a whole or choose stocks that historically pay dividends. An emerging investment category — exchange-traded funds (ETFs) — represent a basket of securities and are traded like stocks on stock exchanges, most with relatively low fees. There are different kinds of ETFs that have different benefits. If lowering exposure to market risk is a top concern, a buffered ETF may be a good option. Those ETFs can help manage downside exposure.

3. Invest in Your Future.
Determining your financial goals will help figure out how that money in cash could help you achieve them.
Maybe you have some shorter-term goals, like saving for a down payment on a house. If you’re thinking that purchase will happen soon, keeping money in cash may make sense. For goals further in the future, investing at least a portion of your excess cash in some growth opportunities may be wise so you have more invested in the future.
Saving for retirement is a lifelong goal. If your cash reserve is growing every month, you might want to take a look at increasing your 401(k) contribution. If your employer offers a match on your contributions, make sure you take full advantage of that benefit — it’s like getting free money. You don’t want to pass up on any free money, do you?
If you have an IRA that was funded with rollovers from previous employer plans, you may want to talk to a financial professional about ways to invest for growth and protection. Depending on how close you are to retirement, investing in a fixed index annuity (FIA) with principal protection may be an option, or if you want more growth with a level of protection, a buffered registered index linked annuity (RILA) may be able to offer you the protection you desire with the future growth you may need.
In the end, you want your money to be working for you and toward your financial future. Letting money sit in cash with today’s interest rates is likely losing purchasing power. Make sure that even in this volatile market, you make financial decisions on behalf of your future self.
--
Allianz Life conducted an online survey, the 2022 Q4 Quarterly Market Perceptions Study in December 2022 with a nationally representative sample of 1,005 Respondents age 18+.
Investment involves risk including possible loss of principal. There is no guarantee the ETF funds will achieve their investment objectives and may not be suitable for all investors. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing.
Annuity protection benefits are backed by the financial strength and claims-paying ability of the issuing insurance company.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Kelly LaVigne is vice president of advanced markets for Allianz Life Insurance Co., where he is responsible for the development of programs that assist financial professionals in serving clients with retirement, estate planning and tax-related strategies.
-
The Most Tax-Friendly States for Investing in 2025 (Hint: There Are Two)
State Taxes Living in one of these places could lower your 2025 investment taxes — especially if you invest in real estate.
-
Want To Retire at 55? See If You Can Answer These Five Questions
Who said you can’t retire at 55? If you say yes to these questions, you may be on your way to an early retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on Retirement
While some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
One Small Step for Your Money, One Giant Leap for Retirement
Saving enough for retirement can sound as daunting as walking on the moon. But what would your future look like if you took one small step toward it this year?
-
This Is What You Really Need to Know About Medicare, From a Financial Expert
Health care costs are a significant retirement expense, and Medicare offers essential but complex coverage that requires careful planning. Here's how to navigate Medicare's various parts, enrollment periods and income-based costs.
-
I'm a Financial Planner: Could Partial Retirement Be the Right Move for You?
Many Americans close to retirement are questioning whether they should take the full leap into retirement or continue to work part-time.
-
From Mortgages to Taxes to Estates: How to Prepare for Falling Interest Rates
As speculation grows that the Federal Reserve will soon start lowering interest rates, now is a good time to review your financial plans for housing, estate, taxes, investing and retirement to make the most of potential changes.
-
This Is How Lottery Winners Build Lasting Legacies, From a Financial Professional
Winning a massive lottery jackpot, like the recent $1.4 billion Powerball, requires seeking immediate legal and financial counsel, protecting your identity and winnings and planning your legacy.
-
I'm an Investment Strategist: This Is How the Fed's Next Rate Move Could Impact Your Wallet
Interest rate cuts might be coming, which could affect everything from your credit card debt to your mortgage. It's smart to prepare now — here's how.
-
I'm a Retirement Planner: These Are Three Common Tax Mistakes You Could Be Making With Your Investments
Don't pay more tax on your investments than you need to. You can keep more money in your pocket (or for retirement) by avoiding these three common mistakes.