If you have read a number of my posts then you probably know cash is my least favorite savings option because it's very hard to put it to work. What I mean by that is liquid cash earns a very small amount of interest when you compare it with the rise in inflation. Hence, I do not recommend to maintain more cash then what you need in the form of a monthly supplies fund or an emergency fund. There may be other situations, where for example you could be close to buying a home and yes it would make sense to hold the down payment money for the home in cash.
For maximizing the value of liquid cash, there aren't a lot of great options, but there are a few where you still get something back to fight inflation. How an average American saves varies by each household, demographics and their income status. In 2019, the U.S. Federal Reserve did a study where they found the median transaction account balance was $5300 and the average transaction account balance was $41,600. Transaction account balance signifies a combination of checking accounts, savings accounts, money market accounts and prepaid debit cards. This is indeed a good amount of money and hence needs a good strategy to increase its value.
A lot of people don't really think too hard on where they may be holding cash and hence this results in them losing some of the value they could have earned in a higher interest vehicle. Checking accounts should mainly contain your account balance for the recurring monthly costs like your credit card bills, electricity bills, groceries etc. These do not (usually) earn any interest rate unless you have a relationship account status with your bank which means you maintain a much large balance with them. Hence the money you keep in your checking is really depreciating with time as inflation is increasing. So I recommend people to keep the least amount of money in these accounts as possible.
Next comes savings accounts, traditionally savings accounts offered by large banks have been very close to checking accounts; meaning they earn minimal interest (example 0.01% Annual Percentage Yield). This is why it is important to start looking at High Yield Savings Accounts (HYSA). The High Yield Savings accounts are usually from online banks which are not your traditional brick and mortar banks. These online banks save a lot of money because of their pure online presence and offer a much higher interest rate (example 0.50% Annual Percentage Yield).
Another investment vehicle is Money Market Accounts (MMA) which could act as a good savings vehicle. Money Market Accounts are very similar to Savings accounts and hence are FDIC insured. The most important point to still remember is that you need to be careful about where you open the MMA - traditional large bank vs online bank. To stress on this point, you will earn a higher interest through an online bank rather than the traditional large bank.
Money Market Accounts and High Yield Savings Accounts are both great investment vehicles but there are a few differences. MMA allows you to write checks, use an ATM debit card while with HYSA its more of a money holder. You may move money between high yield savings accounts but don't get the benefits of MMA which I mentioned above. In simple terms MMA comes with some of the checking account pros with the power of earning higher interest as a HYSA.
It is very important while you are doing your research to carefully look at the benefits when you look at your options, example rates, fees and minimum account balance requirements. You might find a higher interest rate on MMA vs a HYSA in some institutions, but the vice-versa also holds true for some other institutions.
If you need the ability to write checks and the flexibility to get your money out from ATMs then MMA are a better strategy. For me, I would rather restrict the means to get the money out of my HYSA account for obvious security reasons - like ATM and check frauds. Hence for me personally, HYSA makes more sense.
Usually both HYSA and MMA come with transaction limits, hence you have some transaction restrictions which are not there in a checking account. But my point is to use these investment vehicles to save your cash. There are 6 transactions (usually) that you may get each month in these accounts so you can always move money from your HYSA/MMF to your checking account. The important thing to remember is to keep only enough in your checking account that you would need for your monthly expenses. This way you earn more interest and can move money to your checking only when you need it.
Another investment vehicle you may hear about is Money Market Funds (MMF). MMFs are mostly offered by traditional brokerage companies that is very similar to a mutual fund on how they operate. MMFs would come with an expense ratio and potentially some management fees and they don't come with FDIC insurance that you may get from banks. They are obviously less riskier as they invest the money in U.S Treasury bills as an example when compared to a mutual fund which invests in stocks. Personally, I recommend using MMA or HYSA as they are a safer bet and you also beat some potential volatility in MMFs.
If you are willing to take on more risk and are looking to earn even a higher interest on your cash, then maintaining your cash in stablecoins could also be another option. I have discussed stablecoins in much depth in one of my prior article here. Please remember stablecoins are not FDIC insured and come with a much higher risk than your usual bank accounts.
So to summarize, High Yield Savings accounts and Money Market Accounts are two of the best investment vehicles when you are thinking about saving cash and maintain your peace of mind. This gives you an ability to fight inflation to some degree and make your cash work for you. They come with less risk and hence less return but they are definitely a better strategy than to maintain your money in a checking account.