Too Much in Savings? 3 Warning Signs You're Missing Out on Growth

Saving money is never a bad thing. But saving too much -- in the wrong places -- can actually hold you back from earning more.

I learned this the hard way when I realized my growing emergency fund wasn't earning much, while potential investments sat ignored.

If you're sitting on a large pile of cash, here are three signs it might be time to put your money elsewhere.

1. You've saved more than six months of expenses

It's smart to keep three to six months' worth of expenses in a savings account. That's enough to cover most types of emergencies, like job loss, medical bills, and other surprises. But once you've saved that amount, any additional money could be earning more elsewhere.

The best place to keep your short-term savings is in a high-yield savings account, the best of which are offering up to 4.40% APY at the moment. That means you'll be earning a solid return even on the money you want to remain flexible.

2. You're not putting money in the stock market or towards your retirement

If you've built up your savings but haven't started investing, you're missing out on one of the most powerful tools for building wealth.

That's because since 1980, the S&P 500 Index has had an average annual return of 12%, including reinvested dividends. That kind of growth simply doesn't happen in a savings account.

Even small, steady investments can add up. Putting just a few hundred dollars a month into an index fund can earn you tens of thousands of dollars in the long run thanks to the power of compound interest.

The same goes for a 401(k) or IRA, which are some of the best tools available to save money for your retirement. And if you haven't started saving for retirement, do it today -- as the saying goes, better late than never.

3. You're not paying off excess debt

If you're holding extra savings but haven't paid off credit card debt or high-interest loans, you're likely losing money. Even the best savings account APY won't come close to offsetting 20% APR on a credit card balance. It's like swimming against the tide.

Keeping your emergency fund intact is still important. But after that, every extra dollar could make a bigger impact paying down debt than sitting in your savings.

Make your money work harder for you

Saving money is a great feeling, but it's important not to rest on your laurels. At a certain point, having too much cash can actually start hindering your finances.

If your emergency fund is full, it's time to level up: pay off your high-interest debt and start investing for your future.