What Are Money Market Accounts and How Can They Help You Save Money?

A Beginner’s Look In to a Popular Banking Product

Many of us likely have a checking account and possibly a savings account, but there are several other banking products that may help you save even more money than the traditional accounts you may be familiar with.  Money market accounts are one such product, and they’re easy to work with.

How Money Market Accounts Work to Build Your Savings

At their core, money market accounts (MMAs) are like savings accounts but with historically better interest rates. The money you put into an MMA is usually invested into relatively conservative investment products such as government t-bills (treasuries), CDs, savings bonds and so forth.  The interest earned on these investments is then paid back to you.  Generally, the highest money market rates go to investors who contribute a substantial deposit, thereby making more money on their money.

How to Get Started with a Money Market Account

Anyone can start making money with a money market account; they’re excellent places to park some extra cash temporarily while you continue to earn money with it.  Keep in mind that although a money market account sounds like a “hands-off” type of product that you don’t have to manage, it isn’t – and that’s actually a good thing.  In fact, you can do many of the things with a money market account that you can do with a savings and checking account.

For example, you can make a set number of withdrawals every month from a money market account, similar to what you’d do with a checking account. You can also link your money market account to your checking account to help prevent overdrafts.  With online banking, you can set up a schedule so that a certain dollar amount is automatically transferred into your MMA for you every month.  In this way, money market accounts are very easy to manage and help you grow your money over the short term.

An Important Point to Keep in Mind

“Money market accounts” can mean two different things.  There are money market mutual funds, which are handled by professional brokerages and do NOT insure your deposits up to $250,000 the way that a FDIC member bank does.  FDIC member-bank money market accounts are FDIC insured and tend to pay much better interest rates.  Usually, the highest money market rates can be had by going with an insured money market account – but don’t just settle for your local branch’s offer.

 Comparison Shopping Online for the Best Deals

Like nearly all good things, it pays to comparison shop online before you open a money market account.  Helpful sites such as Bankrate can help you understand which bank is currently paying the highest money market rates.  Because these rates can and do shift on a daily basis, it’s a good idea to go beyond the numbers and compare other important points too, such as how many withdrawals you can make, whether or not you can access the MMA over an online banking system, whether or not there’s a minimum balance .

A Great Short Terms Savings Vehicle

All in all, money market accounts are a great place for short term savings that can help your money grow in a safe and insured atmosphere while earning a competitive rate of return on your deposit.  You may even find that researching the highest money market rates online can give you a better interest rate than what you’d get from a local bank or branch.

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