Bank or brokerage? How to maximize your next $100K

When deciding between a bank account vs. brokerage account, the goal isn’t to choose one over the other. Instead, it’s about determining what you want each dollar of your $100K to do. Before exploring allocations, consider the simplest case: keeping all $100K in a bank account.

A bank account prioritizes stability, immediate access, and insured protection of eligible funds in the event of a bank failure. It’s a straightforward option if you expect to have near-term expenses or want a strong buffer. But, once your short-term needs are covered, idle cash begins losing value to inflation. This is where the bank vs. brokerage question comes into play.

In this article, we distill the core decision points and show how Mercury might help you rethink the divide entirely. 

Choosing between a brokerage account vs. bank account becomes easier when you understand what each is built for.

Bank accounts

If you’re weighing bank or brokerage for your next $100K, a bank account offers predictable access, stability, and insurance.

Here’s how this can look in practice:

• Purpose: Everyday spending, emergency reserves, near-term goals
• Protection: Federal Deposit Insurance Corporation (FDIC) insurance of covered funds 
• Liquidity: Immediate, typically 
• Return: Lower, though high-yield accounts can help
• What it’s best for: Bills, rent, taxes, payroll, and any cash you can’t risk

Brokerage accounts

A brokerage account, on the other hand, could become more compelling once your short-term needs are handled.

Here’s how this can look in practice:

• Purpose: Investing through exchange traded funds (ETFs), stocks, and other market assets
• Protection: If your broker-dealer is a Securities Investor Protection Corporation (SIPC) member, your cash and securities are covered if the firm fails. This coverage doesn’t cover market losses.
• Liquidity: Usually 1-2 business days to settle
• Return: Historically higher, though never guaranteed
• What it’s best for: Long-term growth and compounding

Risks and protections at a glance

You may be wondering, “Is money safer in a bank or brokerage account?” Banks offer FDIC insurance against bank failure, and brokerages offer SIPC protection, if a firm collapses. Neither protects against market losses or inflation.

Once you understand the foundational differences between a bank account and a brokerage account, for real clarity, map your $100K to the way you actually earn, spend, and make decisions. Consider the following factors.

1. Liquidity needs

If there’s a chance you’ll need the money quickly for taxes, variable income, or personal runway, opt for a bank. Longer horizons allow more brokerage exposure. In short:

• Short-term money is better suited to a bank account. This is the cash that protects your personal finances from volatility.
• Long-term money is better suited to a brokerage. If you won’t need it in the next six to 12 months, letting it sit idle may cost you financial growth.

2. Appetite for risk

If volatility distracts you or affects your work, consider keeping more in cash. If you’re comfortable with swings in exchange for long-term upside, look toward investing. In other words:

• Lower risk tolerance? Keep more in the bank. Stability is worth more than potential upside if volatility compromises your peace.
• Higher risk tolerance? Tilt toward the brokerage. Meaningful long-term returns may require short-term discomfort.

3. Automation and control

If you prefer predictable balances, bank heavy allocations may work well. If you value set-and-forget automation and rebalancing, a brokerage allocation could be easier to manage. Think of it this way:

• If you prefer simplicity and clarity: Bank-heavy allocations are largely associated with predictable balances and minimal movement.
• If you appreciate optimization and compounding: Brokerage-heavy allocations tend to pair well with auto-investing and automated rebalancing.

Modern platforms, like Mercury Personal, help streamline your finances by letting you automate everything, including cash buffer refills, excess sweeps into higher-yield savings, scheduled or rules-based investing, and rebalancing across your allocations.

4. Tax considerations

Bank interest is taxed as ordinary income. Investment gains that are held long enough may be taxed more favorably. Keep this in mind:

• Bank interest is taxed as ordinary income. This is typically straightforward, but often comes with higher tax rates.
• Investment income can be taxed at lower long-term capital gains rates. These rates are often lower and more tax-efficient over time. 

Putting this together

Here’s a comparison chart for a quick look at these decision drivers.

Mercury Personal brings your banking and investing tools into one streamlined personal banking platform. This reduces the friction of juggling multiple apps and separate systems.

A single place for spending, saving, and investing

Mercury Personal brings everything under one roof, including:

• Multiple checking and savings accounts
• Up to $5M FDIC insurance on deposits through partner banks’ sweep networks
• Mercury debit card with zero foreign transaction fees
• Investing directly inside your dashboard

You get the stability of banking and the growth potential of investing, without bouncing between platforms.

Custom controls, automation, and yield

Your finances shouldn’t require constant tinkering. With Mercury Personal, you can set rules that let your system run itself. You can:

• Open multiple checking and savings accounts to separate goals.
• Set automatic transfer rules between accounts. (For example, keep checking at a target balance, move excess to savings, or route funds to investing.)
• Earn 3.5% APY on savings accounts with no minimum balance requirements.

These tools let you maintain liquidity where you need it and put surplus cash to work.

Premium design without app-juggling

Founders and professionals already live in dashboards and tools all day. Mercury Personal keeps things streamlined with a clean interface that surfaces what you need and removes what you don’t. You can:

• View and manage personal and business accounts in the same dashboard.
• Move between checking, savings, and investing without switching apps.
• See balances, allocations, and activity in one place, for clearer decision-making.

The result is a single, organized workspace, instead of multiple disconnected financial tools.

A connected financial ecosystem

With Mercury Personal, you get the stability of a bank account and the growth potential of a brokerage account, wrapped inside one frictionless experience. Whether you’re planning next quarter’s cash flow, saving for a big move, or investing for the long horizon, everything flows together the way it should.

Learn more about why Mercury Personal is the modern way to manage your money.

Everyone’s financial goals look different, but having a structured starting point makes it easier to decide how to manage your money. Here are three allocation models meant for modern, high-earning professionals.

1. The 50/30/20 approach for the ambitious operator

The traditional 50/30/20 budgeting rule allocates up to 50% of after-tax income to needs, 30% to wants, and 20% to savings or debt repayment. You can adapt this logic as a starting point:

• Bank account: $50,000 (50%) for everyday cash, emergency fund, upcoming taxes, and one to two years of stability
• Brokerage account: $30,000 (30%) for moderate risk products, designed for long-term compounding.
• Brokerage account: $20,000 (20%) for higher-risk allocation for growth-oriented assets

People with stable income, who want a mix of liquidity, predictability, and market-driven growth, should consider this option.

2. A ‘conservative’ plan

If you prefer to take a lower-risk approach with your $100K and you’re okay with a lower rate of growth, you can consider shifting toward cash and reduce your market exposure. A more conservative approach allocates 70%, 80%, or even 90% of your funds to bank accounts.

Here’s what a 70/30 split might look like:

• Bank account: $70,000 into high-yield savings and checking accounts
• Brokerage account: $30,000 to brokerage with lower risk products only

This approach aligns with the goals of people prioritizing certainty and wanting to cushion against volatility without removing market growth entirely.

3. An aggressive growth plan

On the other end of the spectrum, there are options for people comfortable with taking on more risk in exchange for the potential of higher long-term returns.

A 30/70 split could look like allocating:

• Bank account: $30,000 in a bank account, for core liquidity for near-term spending and a minimal emergency buffer
• Brokerage account: $70,000 in a mix of moderate or growth-oriented funds

For those with stable income, high risk tolerance, and a long time horizon, who want to prioritize growth over short-term stability, this option may be a good fit.

Sample allocation snapshot

Use these examples only as starting points. Your own mix should adapt to your income stability, risk tolerance, and personal goals.

Is my money safer in a bank or brokerage account?

Bank accounts offered through FDIC-insured institutions are eligible for protection against bank failure. Brokerage accounts aren’t FDIC-insured and are subject to investment risks, including possible loss of the principal invested, but may offer SIPC protection against broker failure. Neither protects against inflation, but only brokerages carry market risk.

What happens if markets dip?

Short-term volatility is expected. If you need the money soon, consider keeping it in the bank. If your horizon is longer, dips are usually thought to be the cost of long-term compounding.

How fast can I access invested cash?

Access will depend on the specific investments, but typically it takes a business day or two for the sale to fully settle before the cash is available to withdraw.

Can I pay bills from my brokerage?

Generally, no. Brokerages aren’t optimized for spending. That’s where a bank account shines.

There’s no universal playbook for deciding where your $100K should go. What matters is aligning each dollar with your goals, time horizon, and comfort with risk. Bank accounts protect your short-term finances. Brokerage accounts support long-term financial growth. The real advantage comes from building a system that can allocate, automate, and adjust as your needs evolve.

Mercury Personal brings that system into one modern experience, so your money doesn’t just sit idle; it moves with purpose. 

Explore how Mercury Personal can help you build a clearer, more intentional financial foundation.