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Key Considerations for an HYSA Balance

1. Emergency Fund:

   • A six-month emergency fund is the general benchmark, which you’ve identified as $50k. This amount ensures you can cover necessary expenses like rent, food, and insurance during unforeseen circumstances (job loss, medical emergencies, etc.).
   • If your job stability or income stream is uncertain, you might want to increase this to 9–12 months’ worth of expenses.

2. Short-Term Goals:

   • Money earmarked for near-term financial goals (e.g., a home down payment, car purchase, or planned medical expenses) should also be kept in your HYSA or other safe, liquid accounts.
   • If you’re saving for a specific goal within the next 2–3 years, it’s reasonable to keep those funds in the HYSA to avoid market volatility.

3. Opportunity Costs:

   • Keeping more than what’s necessary in an HYSA means missing out on potential growth from higher-return investments, like a taxable brokerage account. HYSA rates (around 4–5% currently) are competitive with inflation but won’t offer long-term wealth-building benefits.

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Recommended Range for HYSA

For a household earning $100k–200k annually with a six-month expense requirement of $50k:

• Minimum HYSA Balance: $50k (to fully cover your emergency fund).
• Maximum HYSA Balance: ~$70k–80k if you want additional cash cushion for unexpected opportunities or extra security.

Anything beyond this range is likely better invested elsewhere.

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Options for Excess Funds

1. Taxable Brokerage Account:

   • Why: Offers growth potential via diversified investments (e.g., index funds like the S&P 500 or total market funds). Historical stock market returns average ~7–10% annually, which can significantly outpace HYSA yields.
   • How to Invest:
     • Allocate funds based on your risk tolerance and timeline.
     • A balanced portfolio (e.g., 70% equities, 30% bonds) is ideal for medium-term goals, while a more aggressive stance (e.g., 90% equities) suits long-term goals.

2. I Bonds or Treasury Bills:

   • Why: These offer low-risk returns that currently outpace inflation. Treasury bills are especially liquid, with short-term maturity periods (4–26 weeks).
   • How to Invest: I Bonds can be purchased through TreasuryDirect.gov, with an annual limit of $10k per individual.

3. Future Planning:

   • 529 Plan: If you have children, consider funding a 529 plan for future education costs.
   • Real Estate or Other Assets: If you have a specific goal like buying a home, consider saving excess funds in a separate account aligned with that timeline.

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Final Thoughts

An HYSA is a great tool for liquidity, but beyond your emergency fund and short-term savings needs, the excess should work harder for you. For your household, keeping $50k–70k in the HYSA strikes the right balance of security and efficiency, with the remainder allocated to higher-growth investment vehicles. If you’re unsure where to start, consider speaking with a financial advisor to ensure your portfolio aligns with your goals and risk profile.