FAQs: What is a money market? What are the benefits of a money market?
Let’s break down and answer these two questions in an easy-to-understand way!
What is a money market?
A money market account is a type of personal savings account offered by a bank that typically pays a higher interest rate than traditional savings accounts. It is a type of deposit account that allows you to earn interest on your balance while also having easy access to your funds.
What are the benefits of a money market?
When you invest in a money market account, you’ll deposit a set amount of money into the account, which will then earn interest.
- Higher interest: Money market accounts typically offer higher interest rates than traditional savings accounts, which means you can earn more money on your deposits over time.
- Low risk: Money market accounts are FDIC-insured, which means that your deposits are backed by the full faith and credit of the US government, up to a certain limit. This makes them a relatively safe investment option for those who are looking to earn a return on their savings without taking on a lot of risk.
- Liquidity: Money market accounts are designed to provide easy access to your funds.
- Diversification: Money market accounts can be a good way to diversify your investment portfolio. They offer a low-risk, low-return option that can balance out higher-risk, higher-return investments.
How is a money market different from a savings account?
Money market accounts offer a higher interest rate than traditional savings accounts, but they also require a higher minimum balance to open and maintain the account.
How is a money market different than a CD (Certificate of Deposit?)
A CD is a type of deposit where you agree to leave your money in the account for a certain amount of time. If you withdraw your money before the end of the term, you will typically pay a penalty fee. (Learn more about what a CD is here.) Money market accounts generally offer lower interest rates than CDs, but they offer more flexibility in terms of accessing your funds. Money markets are generally a better choice if you do not want to tie your money up for a length of time.
How is a money market different from a checking account?
A checking account is designed for everyday transactions, while a money market is designed as a short-term investment.
Overall, if you can afford their minimum balances, a money market account can be a good option for people who want to earn a higher interest rate on their savings while still having easy access to their money. Think a money market is right for you? Contact us or apply for a money market online!
