You probably have a basic savings account where you keep a little of your cash for those “just-in-case” expenses. But did you know you could be earning extra interest on your money by stashing it in a money market savings account?
You may have heard of a money market account before, but you might have explored your options yet. The term “money market” can refer two different things: money market funds that are tied to a brokerage account (e.g. an investment vehicle) or a money market savings account.
While money market funds can help you grow your money through investments, a money market savings account can be a good way to boost your savings without the associated investing risk.
How is a money market account different than a savings account?
Like a traditional savings account, you can get a money market savings account at your local bank or credit union. And like a savings account, your money is FDIC-insured in a money market savings account (which isn’t the case with a money market fund). But that’s where the similarities mostly stop. The biggest appeal for opening a money market savings account: you can earn significantly more interest than you can on normal savings account. The catch? You’re only allowed to make a few withdraws every month and you have to maintain a high minimum balance - usually of a few thousand dollars. On top of that, some market savings accounts charge a maintenance fee.
Is a Money Market Savings Account worth it?
Essentially you’re keeping your money in an account at a higher interest rate in exchange for promising to be more hands off with your money and keep a higher balance in your account.
If you’re looking for a way to grow your funds and you have some money that you can sock away without needing to withdraw it in the short-term, a money market savings account may be the right option for you. If you’re looking to access your money sooner rather than later or make multiple withdrawals from your account throughout the month, you may want to stick with a traditional savings account.