Is it better to put money in savings or money market account?
Savings accounts generally lack the minimum deposit and balance requirements many money market accounts have. However, money markets typically offer higher interest rates than regular savings accounts, letting you earn more on your saved money.
Money market accounts pay a slightly higher interest rate than traditional savings accounts because banks invest in short-term, highly liquid, low-risk assets with the funds. Many money market accounts come with minimum balance requirements.
Disadvantages of money market accounts may include hefty minimum balance requirements and monthly fees — and you might be able to find better yields with other deposit accounts.
Money market funds tend to pay a slightly higher interest rate relative to high-yield savings accounts, Elliott said.
Money market accounts tend to pay you higher interest rates than other types of savings accounts. On the other hand, money market accounts usually limit the number of transactions you can make by check, debit card, or electronic transfer.
A money market account is a type of savings account that usually offers a higher interest rate and easier access to your money than a typical savings account. That means you can get checks or a debit card to spend the money in your account—though you might be limited on how often you can make a withdrawal.
Because they invest in fixed income securities, money market funds and ultra-short duration funds are subject to three main risks: interest rate risk, liquidity risk and credit risk.
If you want to earn a higher APY and you can meet a higher account minimum, a money market account is a good choice. It's also a smart option if you need easy access to your money. If you know that you won't need the money for a while and want to earn an even higher APY, a CD works well.
However, because some financial institutions limit withdrawals on money market accounts, you could incur fees if you exceed those limits. Likewise, many money market accounts have minimum balance requirements. If the balance drops below that amount, you could incur fees.
First and foremost, money market accounts are typically safe because they're insured by the federal government. If you open a money market account at a federally insured bank, the Federal Deposit Insurance Corp. (FDIC) insures up to $250,000 of your cash per bank, per depositor.
Which is safer money market or CD?
Both CDs and money market accounts are safe investments. They typically include FDIC insurance and don't involve the purchase of securities that may fluctuate in value. The only situation in which your investment could be at risk is if the financial institution at which you open the account declares bankruptcy.
Money market accounts and savings accounts are equally safe places for consumers to keep their savings. However, it's important to open accounts at banks that are covered by FDIC insurance. You can check if your bank is FDIC-insured here.
Both CDs and MMAs are federally insured savings accounts, so they're equally safe.
Type of account: As of February 2024, no banks are offering a 7% interest savings account. However, two credit unions are offering that rate for one of their top-tier checking accounts. Get to know the differences between checking and savings accounts to see if the APY is worth the switch.
Money market accounts are considered safe, low-risk investments. They earn interest and allow for easy access to your money. Your balance is also FDIC-insured, so it's unlikely that you'll lose money. However, fees and interest rate changes could deplete your returns.
I suggest a Money Market account with no penalties and full check-writing privileges for your emergency fund. We have a large emergency fund for our household in a mutual-fund company Money Market account.
For the most part, money markets provide those with funds—banks, money managers, and retail investors—a means for safe, liquid, short-term investments, and they offer borrowers—banks, broker-dealers, hedge funds, and nonfinancial corporations—access to low-cost funds.
Money market funds can protect your assets during a recession, but only as a temporary fix and not for long-term growth. In times of economic uncertainty, money market funds offer liquidity for cash reserves that can help you build your portfolio.
| Bank | APY* | Minimum opening deposit |
|---|---|---|
| EverBank | 4.75% | $0 |
| Redneck Bank | 5.05% | $500 |
| Sallie Mae Bank | 4.75% | $0 |
| UFB Direct | 5.25% | $0 |
Types of Money Market Funds
Government funds must invest 95.5% of their assets in government-issued securities and consequently are extremely safe. Municipal money market funds invest in municipal bonds issued by municipalities and municipal agencies, which pay interest exempt from federal income tax.
Are money market accounts taxable?
The earnings from money market funds can come from interest income or capital gains, so they're taxed the same way as other investment income.
Money market accounts work like other deposit accounts, such as savings accounts. As customers deposit funds in a money market account, they earn interest on those funds. Typically, interest on money market accounts is compounded daily and paid monthly.
CEO of Berkshire Hathaway, Mr. Warren Buffett himself has many money market accounts and Treasury bills. Millionaires and billionaires such as Buffett also have zero-balance accounts with private banks. This allows Buffett to leave his money in cash and cash equivalents and write checks on his zero-balance account.
There is no direct way to lose money in a money market account. However, it is possible to lose money indirectly. For example, if the interest rate you receive on your account balance can no longer keep up with any penalty fees you may be assessed, the value of the account can fall below the initial deposit.
- Stocks.
- Real Estate.
- Private Credit.
- Junk Bonds.
- Index Funds.
- Buying a Business.
- High-End Art or Other Collectables.
