Is It Possible to Over-Save Money? Yes—Here's Why It's Bad

A man in a suit sitting on top of a mountain of coins, representing the issue of over-saving money

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Is it possible to save too much money? Why is over-saving a bad thing? Why has excessive saving become common among Americans?

Financial anxiety is driving Americans of all incomes to save too much money, often at the expense of their long-term wealth and current quality of life. Financial experts say extreme savers miss opportunities for higher investment returns and delay important life decisions.

Here’s why, counter to popular belief, over-saving isn’t actually a good thing.

The Rise of Extreme Savers

Over-saving occurs when people accumulate excessive cash reserves at the expense of other financial priorities, failing to balance current needs with future goals. This often manifests as setting aside significantly more than typical or recommended amounts for their demographic.

Recent surveys show growing financial unease among Americans: The portion feeling financially secure dropped from 28% to 25% between 2023 and 2024, with 30% now believing they’ll never achieve security. This reflects a broader trend, with 80% of Americans reporting some level of financial anxiety this year, up from 71% in 2021.

Patterns of Over-saving

People of all income levels may over-save, adopting these defensive financial behaviors:

Excessive contributions. Some young professions are exceeding the annual 401(k) contribution limit of $22,500.
Discount shopping. High-earning households (those making $175,000-$199,999) are increasingly adopting money-saving shopping tactics.
Protective saving. Even Americans with multimillion-dollar portfolios are keeping nearly twice the recommended amount of cash.

What’s Driving the Trend?

The trend of excessive saving comes even as inflation rates slow, with Americans of all financial backgrounds expressing concern about costs being higher than they’ve been historically.

In addition, rising home prices and mortgage rates during the pandemic changed Americans’ perception of financial security. This shift in expectations coincides with record-high white-collar job cuts in 2024 (664,000 through October) pushing well-paid professionals to stockpile cash as protection against potential job loss.

Political uncertainty has added to these economic pressures, with one in five Americans reporting that concerns about the November elections led them to change their investment or spending patterns.

The Costs of Over-Saving

Financial experts warn that excessive saving can not only hamper Americans’ ability to accumulate wealth, but impact their quality of life.

Money held in savings accounts faces two key challenges: First, inflation erodes purchasing power. Second, savers miss out on better returns from investments like stocks and real estate that benefit from compound growth.

The impact of over-saving extends beyond financial consequences: Many retirees become so focused on preserving their nest egg that they deny themselves a comfortable lifestyle even when they can afford it, defeating the purpose of having saved the money. This pattern affects younger savers too, as many professionals with adequate resources delay major life milestones like buying homes or starting families due to outsized retirement anxiety.

The Savings Divide

While some Americans struggle with over-saving, most workers face the more troubling reality of being unable to save enough for their future. Nearly two-thirds of workers report they haven’t saved enough for a comfortable retirement,

Financial experts estimate workers will need to save 13 times their annual salary by age 65—a target that keeps rising with longer life spans and increasing health care costs. As a result, many older Americans are delaying retirement or returning to work after leaving their jobs.

Tips for Saving for Retirement

Here are five tips to save for retirement from Jack Canfield’s The Success Principles.

1. Save at least 10 percent of your income per month. It may not seem like much, but even just saving a small amount now helps you save later.

2. Save more than you spend. This tip is also called the 50/50 law because to save more than you spend, you effectively can’t spend more than 50 percent of what you earn. This rule was developed by Sir John Marks Templeton, a stockbroker. He and his wife decided to invest 50 percent of what they earned in stocks and give 10 percent of their income as tithes to their church, leaving them to live on just 40 percent of their income. He became a billionaire.

3. Invest automatically each month. The best way to ensure that you save money each month is to set up automatic contributions to retirement funds. Depending on your employment situation, there are two ways to do this:

Use your company’s retirement plan. If your company offers a 401k or other retirement plan, choose to have a portion of your income directed there each month. That way, it’ll be automatically set aside before you get your paycheck and you won’t have to pay taxes on the money until you use it. If your company matches what you put into your 401k, take advantage: Make the largest contribution you can legally. Ideally, contribute at least 10 percent; however, if that feels like too much, contribute as much as you can.
Open your own IRA or Roth IRA. An IRA, or Individual Retirement Account, is a great way to save money if your employer doesn’t provide a 401k. Ask a financial advisor whether an IRA or Roth IRA would be best for you. You can contribute $5,500 per year to a traditional IRA, or $6,500 if you’re 50 or older. Set up an automatic transfer from your bank account into this account so that you don’t have to think about it.

4. Consult with a financial advisor. A financial advisor can tell you how to best invest your money, or can do it for you. Ask friends if they have a financial advisor they recommend, or look for someone who has experience managing the finances of someone in the same stage of life as you. Make sure they charge a flat fee rather than a variable rate based on how much money you have.

5. Insure your assets. Protect your assets with insurance or legal agreements. This could include a prenuptial agreement between you and the person you’re planning to marry or liability insurance if you’re self-employed.

Is It Possible to Over-Save Money? Yes—Here’s Why It’s Bad