Money market fund vs savings account
After you’ve started to save money, you might be wondering where you should store it. Money market funds, money market accounts, and traditional savings accounts are all popular choices.
All three are excellent locations to keep cash. However, because most conventional savings accounts pay little interest, the money market fund or account may be a better option since they usually pay greater returns. You can also accept checks and quickly move money between your savings account and other accounts through many money market products.
What they offer
The purpose of a money market fund is to earn interest on your money and keep it safe.
A savings account works much the same way as a money market fund. They both offer forms that you can safely hold onto your money and still earn interest on it.
There are two primary differences between a savings account and a money market fund. First, the amount of return you will receive from them varies greatly – savings accounts tend to have minimal returns while money market funds generally pay higher returns. Second, there are FDIC (Federal Deposit Insurance Corporation) insurance requirements for savings accounts but not for most types of money market funds (though other agencies may insure some).
Investment experts say that those who invest long-term should use money market funds. However, savings accounts may be better for those looking to save for a short-term goal since they generally offer lower returns. You could also combine the two by opening both accounts and putting half your money in each.
But whatever you do, make sure that whatever interest rates are available now will still apply when you want to withdraw your money. It’s something that many people fail to consider but can mean significant losses if you don’t consider it. When you’re deciding where to put your money, it’s also a good idea to consider the purpose of this money. If you want to save and not touch the money for a while, then both types of accounts are great choices. But if you would like to withdraw or access your money, there may be other options available such as a checking account or savings account with meagre fees or no minimum balance requirement.
Savings accounts offer ways to safely hold onto your money and still earn interest on it, but they tend to have minimal returns, while money market funds generally pay higher returns. There are FDIC (Federal Deposit Insurance Corporation) insurance requirements for savings accounts but not for most types of money market funds (though other agencies may insure some). Investment experts say that those who invest long-term should use money market funds. However, savings accounts may be better for those looking to save for a short-term goal since they generally offer lower returns. You could also combine the two by opening both accounts and putting half your money in each. When you’re deciding where to put your money, it’s also a good idea to consider the purpose of this money. If you want to save and not touch the money for a while, then both types of accounts are great choices. But if you would like to withdraw or access your money, there may be other options available, such as a checking account or an account with low fees or no minimum balance requirement.
Money market funds are similar to savings accounts, but they typically offer higher returns and are not insured by the FDIC. Those who invest for the long term should use money market funds – those looking to save for a short-term goal might want to consider savings accounts. The good idea is to put half your money in each type of account. Make sure that whatever interest rates apply now will still apply when you want to access or withdraw your money.
In conclusion
Savings accounts generally have small returns, but those interested in safety can make a combination of both types of accounts and open both types with different purposes (i.e., one for short-term goals and one for long-term investments).
Both savings accounts and money market funds are good choices for those simply looking to save with no interest in immediate access or withdrawal of the funds.
If you’d like to find out more about these accounts, get in touch with Saxo.
