Introduction

Are you looking for a way to take advantage of current high interest rates on savings? A money market account might be the perfect solution for you. In this article, we’ll explore the benefits of money market accounts and why they could be a better option than your existing savings account. For any mortgage service needs, don’t hesitate to call O1ne Mortgage at 213-732-3074.

1. Easily Access Your Money

Money market accounts function like a blend of a checking and savings account. They earn interest and may have monthly withdrawal limits like a savings account, but you can access the money with a debit card or checkbook as with a checking account. These accounts may require a minimum deposit to open and a minimum balance to maintain.

With a money market account, your money is safely parked in an account that earns interest and can receive additional deposits. It’s liquid enough to be accessed anytime, usually with a debit card or checkbook, which you won’t find with a normal savings account.

However, financial institutions may only let you make six withdrawals or transfers each month. This makes money market accounts ideal as a safe spot to store your emergency fund or other savings that you only need occasionally but may periodically need urgently.

2. Earn Solid Interest

One of the appeals of money market accounts is their interest rates are usually higher than traditional savings accounts. With interest rates on the rise, you get rewarded more generously for saving money. Some money market interest rates are currently as high as 4.55%.

As you shop around, read all of the account terms closely. Sometimes, higher APYs are available in return for higher minimum initial deposits or account balances. Additionally, the way the interest compounds can impact how much you earn. If it compounds more rapidly, such as daily or monthly rather than quarterly, you can earn returns more quickly.

High-yield savings accounts may have higher interest rates than money market accounts, but they are less flexible since they don’t usually come with a debit card or checkbook. If you’re less concerned about having quick money access and more focused on maximizing interest, it’s worth shopping around and doing some comparisons of money market accounts to high-yield savings accounts to ensure you’re getting the best deal.

3. Enjoy Low Risk

Where you save money should be based on your goals. There’s no denying that deposit accounts probably won’t deliver the best returns over time, especially compared to the stock market. But investments are unpredictable, and stocks can tumble and lose value.

While the money you put in money markets is technically invested in financial markets, it’s in low-risk investments, and your money is protected (up to a limit—more on that below).

Additionally, you’ll increase your starting balance as you earn interest, especially if you keep adding to your account. Earning interest on your savings can help increase your buying power during periods of inflation.

4. Benefit From FDIC or NCUA Insurance

Traditional deposit accounts, like checking and savings accounts, are insured up to a certain amount by the FDIC (if a bank) or the NCUA (if a credit union). This isn’t the case with investments, where money can be lost without repercussion.

Because money market accounts are deposit accounts, they, too, are insured by these federal agencies. Banks and credit unions cover up to $250,000 per depositor, per ownership category. Should the bank go out of business, the government is obligated to give you your money back. Just know that the insurance doesn’t cover beyond that amount, so if you have more than $250,000 in your deposit accounts (or $500,000 if they are joint accounts), anything above that is at risk.

Also be aware that there’s a separate financial product called money market mutual funds, which are offered by brokers and are not federally insured.

The Bottom Line

Money market accounts are a low-risk way to set aside money for short-term purposes and let it grow, while offering easy access should you need to tap into it. If you run into a financial emergency, one option is to use a low APR credit card to cover short-term expenses. But the more prudent way to handle unexpected expenses is to have an emergency fund that lets you avoid going into debt when life throws a curveball. For some, a money market account may be the ideal place to store this financial fallback securely.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. Our team of experts is ready to help you navigate your financial journey and find the best solutions for your needs.