A money market savings account is a safe way to plan for the future, according to Bankrate.com. Unlike the stock market, these accounts are insured by the FDIC, which means your money is sheltered from market risk. These accounts also pay more then traditional savings accounts.
What is a Money Market Savings Account?
Before opening an account, it’s important to understand how these accounts work. A money market savings account is a specific type of savings account. These accounts are offered by a variety of financial institutions, including credit unions and banks.
The difference between a traditional savings account and a money market savings is money market accounts pay higher yields, according to the Bankrate.com. For example, a traditional savings account may pay .50% Annual Percentage Yield (APY), while a money market may pay a percentage point higher.
Also, with a money market saving accounts, there is more flexibility. These accounts have check writing capabilities, which allows for up to three checks each month.
Tiered Rates of Return
Most financial institutions offer “tiered rates of return.” This means, the more money invested, the higher the earnings. For example, an investment of $50,000 (instead of $1,000) may earn a higher yield, depending on the market conditions.
However, if the account falls below the minimum balance, the account may revert to a lower interest rate.
Withdrawal Rules
Check writing ability gives money market accounts more flexibility, but be careful about withdrawals. Most banks limit the number of withdrawals account holders can make each month. If the account exceeds the maximum number of withdrawals, a service fee may be assessed. When shopping for accounts, make sure to ask about these fees.
Where to Find the Deals
When shopping for a money market savings account, compare several financial institutions. Banks and credit unions offer special deals in the business section of your local newspaper. Also, companies like www.bankrate.com allow you to compare several money market accounts at one time.
Get to know your local credit union or bank relationship manager. If you have several accounts with a bank, they’re usually happy to give you the heads up on special promotions. Some companies even offer relationship discounts.
When investing in a money market saving account it’s important to remember rates aren’t locked in. Financial institutions make rate adjustments often to reflect the current market conditions. For this reason, it’s important to keep ahead of the curve and always be on the look out for good deals.
Nicki Howell - Nicki graduated with a Bachelor of Science Degree in Business Administration Marketing. Upon graduation, she launched a career in ...
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