The benefits of a money market account

If you have more than $1000 sitting in your savings account, chances are you are missing out on a significant opportunity to earn extra interest. If you took the same amount and invested it into a money market account, you would not only earn more interest, but you would not sacrifice liquidity. While most savings accounts offer very low interest rates, the typical money market account pays between one half and two percent higher interest rates than most bank savings accounts.

Liquidity

Many people believe that money market accounts may not be liquidated for ready cash. This simply is not true in most instances, money market accounts offer the same liquidity as savings accounts.  Before you agree to invest in a money market account, you should carefully explore not only the interest rate they are paying, but any restrictions on withdrawal.  For the most part, you will find that your investment is as liquid as your savings account.

Interest

According to Investopedia, money market rates are higher than those of savings plans. In fact, for those who have savings over $1,000 you are typically better off in a money market account than in a
standard savings plan. In most cases, the interest rate difference will be significant and will result in your money growing faster.

Fees

Before you decide to place your money in a money market account rather than a savings account, you should carefully investigate any fees that are associated with this type of investment. Unlike savings accounts, there are fees that could come into play, although they are not usually significant enough to offset the higher interest rate.

Taxes

For those who are concerned about tax brackets, there are several money market funds options which offer tax advantages.  You should carefully investigate possible tax ramifications but, for the most part, you will not face any additional tax burden should you elect to invest in a money market fund versus putting your funds into a savings account.

For many, the advantages that are offered when investing in money market funds are significant when compared to savings accounts. In fact, the additional interest earned may be enough to offset any potential fees. As with any other investment, there is always a risk of loss. Money Market funds are not covered by the usual savings insurance.  If you have more than $1000 in savings, a money market account may be a better option for you than a standard savings account.  It pays to know your options.