July 8, 2020

Choosing Between a Money Market Account and a Savings Account

Money Market AccountIn a world full of fluctuating rates and financial uncertainty people want to know where to invest their money. Money market accounts and savings accounts are two investment opportunities that a very popular and each has their own benefits. But while these two options are pretty similar, and both provide excellent FDIC-insured security for your funds, there are some important differences to understand before you make a decision.

Money Market Accounts

Money market accounts usually require a higher initial deposit than a savings account, and some may also require a higher minimum balance be maintained in the account. They also have greater restrictions than a savings account on how often you can withdraw funds. But the biggest advantage is that these accounts offer a much higher rate of interest than savings accounts, meaning a higher return on your invested funds. Another perk is that some money market accounts might give you the option of writing checks to access your funds, which standard savings accounts won’t do.

Because of the higher deposit and minimum balance the typical investor in a money market account will most likely have a larger amount of money than an investor in a savings account. Also heavy fees will be charged if your balance dips below the minimum so investors need to be confident that they will be able to keep up the account. Of course interest rates and account requirements differ from lender to lender, so there might be some accounts where there differences between money market accounts and savings accounts are slim.

Savings Account

As was mentioned earlier, a traditional savings account comes with lower deposit and balance requirements. Savings accounts also have more flexibility and are the more liquid investment option. However the yield is also lower because of the reduced rates of interest and you do not have the option of writing checks. But for those who don’t want to do away with the savings account just yet, a high-yield savings account may be the ticket. These types of savings accounts are a relatively new option and are mainly found online, but they can offer you a higher rate of interest because their online nature allows them to reduce many of their service costs.

Final Thoughts

Savings AccountDeciding which account is right for you depends on what you are looking for out of the account and what you feel comfortable with. Traditionalists and average investors will feel at home with a standard savings account, while those looking for a little more bang for their buck might opt for a money market account. The high-yield savings account makes some feel nervous because of how new and different it is, but it can still be a viable investment option. Whatever you do, make sure you do a lot of reviewing and comparing before you select anything to make sure you are getting the very best deal.