Money market accounts and savings accounts both offer a safe place to store money, but they come with some key differences.
Money market accounts generally offer higher interest rates than savings accounts, but they also come with minimum balance requirements and restrictions on the number of transactions that can be made each month.
Savings accounts offer a lower rate of interest but don’t come with minimum balance requirements and typically allow a higher number of transactions per month.
When deciding whether to move your money to a money market account or keep it in a savings account, you should consider your goals, the amount you have to invest, and the terms and conditions of each account.
Let’s dive a bit deeper into the advantages of a money market account vs. your typical savings account.
What Is A Money Market Account And How To Choose One?
A money market account is a type of savings account, money market rates are typically higher than a standard savings account.
Money market accounts also typically come with restrictions on the number of withdrawals and transfers that can be made each month.
To choose the best money market account, you should compare the interest rates offered by different banks and credit unions, check the minimum balance requirements, and compare the transaction limits.
Additionally, you should also research any fees associated with the account, such as maintenance fees or ATM fees.
To find different money market accounts, you can search online for banks and credit unions that offer money market accounts.
Additionally, you can compare money market accounts offered by different banks on comparison websites.
You may also want to check with your current bank to see if they offer a money market account with better terms than the one you currently have.
Finally, you can ask friends or family if they have any recommendations for banks or credit unions that offer money market accounts.
Benefits Of Money Market Accounts
Money market accounts typically offer higher interest rates than traditional savings accounts.
Additionally, money market accounts offer more flexibility, as they allow you to make multiple withdrawals and transfers in a month, as opposed to CDs or most other fixed deposit accounts.
Additionally, money market accounts also often come with check-writing ability, making them a more convenient way to access funds.
Lastly, money market accounts may be insured and secured, meaning the funds are safe even if the bank collapses.
If you also invest in stocks, the money market account is a more secure vehicle as your funds grow at a pre-fixed rate and has no volatility.
To effectively make use of a money market, you can consider contributing funds to a traditional savings account on a month-to-month basis.
This is a great way to increase your initial savings and keep saving for short-term objectives.
However, a money market account is a more efficient method of saving for something further ahead, such as long-term savings, such as a wedding, a vacation, a new car, or other objectives.
It can also be used alongside dedicated accounts to store money for a house or college tuition for your children.
Additionally, a money market account allows for better growth of an emergency fund, as the withdrawal restrictions make it less likely for you to spend it on other stuff and keep it secure.
What Is A Money Market Fund?
A money market fund, also referred to as a money market mutual fund, is a type of investment in short-term debt securities.
These assets reach maturity in less than twelve months, which is different from a money market account, which will typically offer higher interest rates the longer you save.
Therefore, money market accounts are more suitable for long-term savings.
The Bottom Line
Money market accounts offer a great way to save and keep your money safe.
However, they come with restrictions on how often you can withdraw and transfer the funds in the account.
To figure out which money market account is best for you and your goals, you’ll need to compare the interest rates, the minimum balance requirements, and the transaction limits.
While a savings account doesn’t come with as many restrictions as a money market account, it also doesn’t offer as much interest.
For more money matters, we recommend reading these techniques for budgeting and saving money. Good luck!
