Money Market Accounts (MMA) work similar to a savings account, but they earn more interest than a standard savings account.
What is a Money Market Account?
It is a type of account that typically offers a higher interest rate than a standard savings account. They also typically require a higher minimum balance. An MMA is also insured by the FDIC or NCUA up to $250K. Some MMA’s work similar to a checking account where you have check writing options and a debit card. Something to keep in mind though is they typically have a limit on the number of withdrawals, purchases or transfers you can do in a month.
These accounts are not designed to be your everyday spending account funds. They give you the flexibility to access your funds when you need them, but typically have transaction limits each month. Before opening an MMA make sure to find out the details from the financial institution you decide to use.
What are some Pros of a Money Market Account?
- Better interest rates than a typical checking or standard savings account
- Deposits insured by FDIC or NCUA, making it a safe place to keep large amounts of money
- Check writing options
- Easy access to funds, some have options of debit cards
What are some Cons of a Money Market Account?
- Often require a higher minimum balance than a standard savings account
- May require a higher initial deposit to open the account
- Interest rates can be lower compared to some High-Yield Savings Accounts
- Having the option to use checks or a debit card can make it easier and more tempting to use it for impulse purchase
- Monthly withdrawal limits
How do I know if I should open a standard savings account or a Money Market Account?
If your goal is to keep building your savings and watch your balance grow, and you don’t foresee needing the funds often an MMA may be the way to go. Also, if you can keep the minimum balance requirement, it is ideal to take advantage of the higher earning interest rates that MMA’s typically offer over a standard savings account.
What are the best things to use a Money Market Account for?
An MMA is a great place to put funds for both short-term and long-term savings goals. You can have a place to put funds that you want to save specifically for larger purchases. It is easier to keep the money separate from your everyday spending funds, so you don’t spend it.
Here are some examples of things you could use an MMA for:
- Vacations
- Tax payments
- Saving for a new car
- Home down payment
- Home improvement projects
- Emergency Fund
- Other short or long-term savings goals
To learn more about Standard Savings Accounts check out the blog HERE.
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