Nov 07, 2018 / Money Tips
A savings account should offer three key benefits: security, accessibility, and a good interest rate. But not all savings plans check all three boxes. For example, you could put money under your mattress where it’s readily accessible, but not exactly secure. And it’s certainly not earning any interest. Or, you could put your money in a traditional savings account where you’ll get increased security without sacrificing much convenience. But your interest rate won’t improve a lot either. A money market account, on the other hand, offers an intriguing balance between each of the three savings benefits. You get security and accessibility with the best money market rates you can find.
As far as security is concerned, a money market account is similar to a normal checking account. That means your deposits will be federally insured up to an amount specified by the terms of your account. So, it’s a no risk savings option just like a traditional savings account with a credit union or bank.
The tradeoff with some high-interest savings and investment options is that you can’t withdraw your money without penalties. But with a money market account, you have easy access to your funds. Most accounts will let you make unlimited deposits and limit withdrawals to a certain number (usually six) per month.
One of the best reasons to open a money market account is to get a higher interest rate on your deposits. Interest rates on money market accounts usually fall somewhere in between a traditional savings account and a certificate of deposit (CD). Again, a money market account hits the sweet spot, giving you better interest rate than a savings account with more flexibility than a CD.
If you’re looking to get a little of every benefit (security, accessibility, and interest rate) from your savings plan, consider opening a money market account. It’s a great way to save for large, infrequent purchases. And it might just be the smartest, most balanced way to save your money.