Key Takeaways
- Money market accounts offer higher interest than regular savings and checking accounts.
- They provide greater liquidity than certificates of deposit (CDs).
- Money market accounts from banks and mutual fund companies differ, so compare their features.
- Bank money market accounts are FDIC insured with a limited number of withdrawals per month.
- Money market mutual funds are not FDIC insured but may offer checkwriting and ATM privileges.
- Consider money market accounts or funds for emergency funds or accessible cash.
Introduction
Money market accounts are back in the spotlight with rising interest rates. This guide explains what money market accounts are, their key features, and how they differ from money market mutual funds. Whether you want higher interest rates or more accessibility to your funds, understanding these options can help grow your cash.
What Are Money Markets?
The money market is where high-quality, short-term debt securities like government or corporate bonds mature within one to 30 days. Money market accounts, offered by banks or mutual fund companies, pay higher interest than regular savings and checking accounts, making them appealing for savvy savers.
Bank Money Market Accounts
Bank money market accounts have FDIC insurance, covering up to $250,000 per depositor per account. Withdrawals are limited to six per month, with exceptions for ATM and in-person transactions. These accounts require a high minimum deposit and may offer check or debit card access for easy withdrawals.
Money Market Mutual Funds
Money market mutual funds, offered by mutual fund companies or brokerage firms, invest in money market securities. They may require a high minimum balance and don’t have FDIC insurance. The fund’s net asset value (NAV) aims to be $1 per share, and some allow checkwriting or ATM withdrawals.
Comparing Money Market Accounts and Funds
Money market accounts are safer with FDIC insurance, while funds are riskier without federal protection. Both offer attractive interest rates compared to traditional savings accounts. Choose an account based on your needs for accessibility and interest rates.
Conclusion
With rising interest rates, money market accounts and funds have become appealing options for smart savers. Whether you prefer bank accounts or mutual funds, consider the minimum balances, withdrawal policies, and interest rates. Enjoy the accessibility of a checking account with the benefits of high-yield savings. Make the most of your cash and grow your financial stability.
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