What Is a Money Market Account?
To accomplish any goal in life, you need a plan. And when it comes to your savings goals, you should consider a plan that includes earned interest and ease of use. A money market account is a great option if you want to watch your money grow while you wait for the perfect time to use it.
What Is a Money Market?
Simply put, a money market account is just a fancy word for a savings account that typically offers a higher Annual Percentage Yield (APY) than most traditional savings accounts. Great for short and long-term savings goals like wedding expenses or college tuition, the higher rate helps your money grow in a secure account until you’re ready to use it.
One major misconception about money market accounts is that they are subject to the ups and downs of the stock market, which is absolutely not true! And while money markets aren’t everyday spending accounts, you have unlimited access to your funds whenever you need them.
Why Is a Money Market a Great Option For Saving Money?
- Simple – As easy to open as a savings account but better suited for growing your money, a money market account is the perfect place to park your emergency fund or upcoming tax payments.
- Secure – Like other deposit accounts, all money market accounts, at least here at Honor Credit Union, are insured by the NCUA up to $250,000.
- Accessible – In the past, money market account holders were limited to six withdrawals or transfers a month. During the pandemic, however, the Federal Reserve issued an interim rule that lifted the six-transaction limit to make it easier for consumers to access their savings. This interim rule removes the accessibility concern, and there is currently no expiration date and no signs that the Feds will reimplement the limit.
Common Questions About Money Market Accounts
While a money market account is an excellent choice for many savings goals, you may have questions about this type of account.
- Do I pay a penalty if I withdraw my money? Unlike a Certificate of Deposit (CD) that requires your funds to remain untouched for a specific period of time, money market accounts are flexible and offer open access to your money without withdrawal penalties.
- Can I use it like a checking account? Some money market accounts offer debit cards and check-writing privileges, but these accounts are not intended for multiple daily transactions. In addition, some money markets require a minimum balance to reap the benefits of a higher APY, making them better utilized as a savings tool.
- How much do I need to open one? Money market accounts tend to have higher opening balance requirements than a standard checking or savings account, so you’ll want to research the best option for your situation.
Is a Money Market Account Right For You?
Whether you’re saving for a home improvement project or a new car, money market accounts offer the perfect balance of simplicity, security, and accessibility. And with higher APYs than traditional savings accounts, you can watch your money grow while you draw the kitchen renovation plans and withdraw it whenever the cabinets arrive.
More To Explore
It’s important to prioritize how you spend your tax refund money, from paying off debt to building an emergency fund and much more.
Learn about short-term savings options like a checking account that earns interest or high yield money market, to long-term savings options like certificates of deposit (CDs).