Today it seems that more and more people are taking more responsibility for their finances. One of the big changes we see is that many people are getting clear of debt and are trying to save more. One way they are saving more is to open a money market savings account.
But what is a money market savings account and how does it differ from a regular savings account or certificates of deposit? Well, for one thing, a money market account is a form of savings that is not nearly as safe and secure as a traditional savings account. With a traditional savings account, your money is insured by the federal government up to a certain limit. You know it is safe. But it won’t earn you much in the way of interest.
A money market is when the bank takes the money you have deposited and invests it in the stock market. As you can imagine, there is the possibility that you can earn a lot more than you would with a traditional savings account, but there is also the very real risk that you can lose your money if the stocks that your money is invested in takes a dive.
Another big difference between a traditional savings account and a money market account is the amount you will need for your opening balance. A most savings account can be opened for around $100, but a money market will need a thousand dollars or more to open the account. This might be another possible reason why a money market account is not a popular personal choice.
A money market can be pretty liquid. Most banks will allow you around 5 or 6 withdrawals per month. Of course, the number of withdrawals you are allowed monthly will vary from one financial institution to another. That is yet one more thing you will need to compare from one bank or credit union to another. With a money market account, you are also allowed to write checks on the account. Though the number of checks you can write monthly is limited.
You will also be likely to get an ATM card with your money market. This makes it easier to get your money when you need it. Check with your bank to be sure, but generally, any ATM transactions will be counted in your total number of allowed withdrawals.
Money markets will also require you to maintain a minimum balance. If your account ever gets below that amount you will be assessed a fee. Make sure you inquire as to what the minimum balance needs to be as well as what the fee will be if you fall below that point.
A money market savings account does have a lot of advantages, but it comes with risks too. Make sure you ask questions so that you fully understand this type of savings option.