What Is A Money Market Account And Why You Should Have One (2024)

But your savings account can often feel like it’s just accumulating pennies at a time. Isn’t there a better way to save? There is, and it’s called a money market account.

In this article, we’ll look at some of the questions you might be asking yourself:

1. What is a money market account?
2. How can I find a money market account near me?
3. Are money market accounts worth it?
4. And much more.

Without further ado, let’s get started.

What Is a Money Market Account?

In very simple terms, a money market account is a type of savings account offered by most financial institutions, like banks and credit unions. It’s designed to have higher interest rates than regular savings accounts. In this way, your money will grow more quickly over time than it would in a typical savings account.

Many regular savings accounts at leading financial institutions have interest rates of only 0.05% (the national average), but many are even less than that. However, money market accounts can have interest rates as high as 1.25%. With rates that high, why wouldn’t you want to put their money in a money market account?

Well, there are reasons for that. In exchange for high interest rates, money market accounts tend to come with extra restrictions. These restrictions can either be mandated by the given financial institution or, in some cases, even by the federal government.

Typically, these restrictions take several forms:

• Limited transactions

  Due to federal regulations, you’re typically allowed no more than six transactions to withdraw funds from a money market account. This can include writing a check, using a debit card, or transferring funds from the account to a typical savings or checking account.

  However, due to the pandemic, in 2020, the federal government waived these fees—make sure you check to see what the status is before you open your local money market account.

• Minimum balance

  Many financial institutions will insist that you maintain a minimum balance in your money market account. The specific amount will depend on your financial institution.

• Minimum new funds

  Alternatively, financial institutions will mandate that you add a certain threshold of funds to your money market account on a monthly or annual basis. Again, this typically varies depending on your financial institution, so check with your credit union or bank to see what the specifics are.

  If you don’t meet the minimum balance or minimum new fund levels, your account may be subject to fees or you may not earn the high interest rates that you wanted the money market account for, so be certain that you don’t fall beneath those levels.

If you don’t meet the minimum balance or minimum new fund levels, your account may be subject to fees or you may not earn the high interest rates that you wanted the money market account for, so be certain that you don’t fall beneath those levels.

Most financial institutions will offer some kind of money market account calculator so that you can get a good sense of how much extra money you’ll earn in interest every year, depending on the principal you use to start your account and what the interest rate is.

How Can I Find a Money Market Account Near Me?

There’s good news if you’re looking to find a local financial establishment where you can open a money market account: most financial institutions offer them. Whether you bank with a large national bank or a local credit union, you should be able to find a money market account that fits your needs.

One alternative to a money market account might be a high-yield savings account. Similarly, these accounts have high interest rates. However, money market accounts often allow you to spend directly from the accounts through checks and debit cards (provided you don’t exceed the federally mandated monthly limit), while high-yield savings accounts typically don’t come with these advantages. A money market account, therefore, is better if you’d like the option to spend the money you’ve been saving.

Are Money Market Accounts Worth It?

There’s no easy answer to this question. It depends heavily on your specific financial situation. In short, the answer is, probably. If you can meet the financial requirements in terms of initial investment and any extra monthly deposits, then a money market account will let you grow your funds at a much higher rate than a typical savings account will.

However, if you cannot meet those requirements, or if you expect to withdraw more than the federal limit from an account every month, then you might be better off using a typical savings account until the time when you’re able to meet these financial limits.

Given the limits on transactions—but comparatively easier ability to withdraw money compared to alternatives like high-yield savings accounts—money market accounts are an excellent choice if you expect to have a major expense coming up in the future. This includes, but is by no means limited to, things like:

1. Weddings
2. Higher education spending (if you have a child entering college, for instance)
3. Home purchases
4. A rainy-day fund

other related articles of interest:

Money Management Tips – Top 3 Ways To Increase Your Savings

4 Useful Tips on How to Boost Retirement Savings

In general, if there is a major expense that you expect to have in the future but don’t currently need to worry about, then you should absolutely be searching “money market accounts near me.” A money market account will help you grow your initial investment in a safe, FDIC- or NCUA-insured manner until you need it most.

Whether a money market account is right for you depends on many factors, including your current income, current savings, what you’re saving money for, and when you expect to need it.

So our experts at Central Willamette Credit Union recommend you discuss it with your local financial institution. Their experienced staff can take a good look at your specific financial situation and make an informed recommendation.

Image Credit: what is a money market account by envato.com

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