Ramit Sethi says 'people with a lot of money' often keep this much cash in their checking account — and it's a very common mistake. Are you doing it, too?

Why they do it

Sethi, who hosts the “I Will Teach You To Be Rich” podcast, says there are two underlying reasons why wealthy individuals keep small sums in their checking accounts.

“It’s usually driven by: 1. They used to not have enough, so all extra money was being used; 2. They think they should invest all excess cash and money sitting in checking is being ‘wasted’,” he explained.

This mindset appears sensible. It's logical to assume that if your checking account has sufficient funds for upcoming transactions, you can allocate any surplus to a savings account for interest accrual or invest it elsewhere for potentially higher returns.

Sethi, however, argues that this mentality can prevent individuals from achieving their desired outcomes: “Unfortunately, their beliefs are not getting them the results they want!”

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The solution

Sethi’s solution is straightforward: “Just keep more in your checking account.”

He contends that keeping an additional $5,000 or $10,000 in a checking account won’t significantly impact a wealthy individual’s financial situation. Meanwhile, this strategy can provide a buffer that allows them to operate with more flexibility than a strict monthly budget might permit.

Sethi observes a noticeable shift in sentiment when individuals follow this strategy: “When they make this change, they instantly feel better about their money.”

He points out that there is a psychological advantage to seeing a higher balance in one’s checking account, regardless of one's financial status.

“Remember that most people — wealthy and non-wealthy alike — derive a sense of comfort from what they see in their checking account,” he wrote.

While Sethi’s post has received more than 642,000 views on X, not everyone agrees with this approach. One X user asked whether that $10,000 would be better kept in a higher-yield account earning 2.7% or more.

Sethi defended his strategy, replying, “Doesn't matter. The interest on $10K, especially for a multi-millionaire, is irrelevant. Money is not always meant to be optimized.”

While the wealthy might not concern themselves with the interest earned on a mere $10,000, for the average person, earning interest can be quite beneficial — particularly in light of the aggressive interest rate hikes by the U.S. Federal Reserve.

These days, some banks and financial institutions are offering high yield savings accounts that pay upwards of 5%.

In the U.S., most savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per insured bank. This insurance provides protection to depositors in the event that the bank fails, ensuring that their funds are safe and accessible.