Upgrade Your Savings: Money Market Accounts
Do you already have a deposit account? Are you wondering about whether there’s a method to earn without digging into complicated or high-risk investment endeavors? You can transfer funds into alow-risk, easy-to-understand money market account. The most important reason to do that is oftenbecause you’ll begin earning higher interest rates than you would with asaving account. But otherwise, the two types of account are actually really similar. This indicates that opening amoney market account will not seem unfamiliar to you.
Here are three questions usually asked by individuals inquisitive about upgrading their high-interest account. The answers can help clarify the hazards, benefits and differences:
1. Can I access my money when it’s in amoney market account?
Yes. Unlike some kinds of investment where you want to commit your money, untouched, for a fixed period of time, amoney market account permits you withdraw or transfer funds as required. You can even be in a position to write checks against this account. But like with asaving account, the amount of times you can make these transactions could be limited. For example, youmay only be in a position to move your money out of your account three times per statement term. The amount you move isn’t traditionally limited, though you could need to maintain a minimum balance in your money market account at all times.
2. Why will my bank pay me more to use this particular kind of account?
The rationale that a bank will be offering you higher interest rates on your money market account than on your deposit account has to do with how the bank itself is federally controlled. The money that you keep in adeposit account cannot be employed by the bank. While they’re safety it, they cannot really touch your money; you can think of it as sitting in stacks in a locked bank vault. But with acash market account, the bank is really permitted to borrow money and use it to make its own investments. The bank, fundamentally, makes cash with your money. The way the bank’s investments fare don’t essentially have anything to do with your total; you’re simply guaranteed the money you put in plus however much extra funds youmay earn due to your rate. You can think about these higher rates as the bank’s way of thanking you for lending it some money.
3. Are money market accounts insured?
Just like asaving account, your money market account is insured by the Federal Deposit Insurance Corporation (FDIC). If the bank overall is insured, allyour accounts with them will be as well. This implies irrespective of what the bank does with your money, whether it loses it all oreven closes, itwill still legally owe you the money you gave them and the interest they guaranteed. Although thereis a limited; your funds are only insured across all accounts you have with the same bank for at least $250,000 as of 2011.
If you’re looking for arisk-free, foreseeable way to invest with rates that are even stronger than asavings account, youwill want to consider a money market account.
TM Murphy is apro writer who lives in NYC. She currently focuses on fashion, beauty, marketing and finance articles. TM Murphy has been writing fulltime since 2006, when she graduated with a B.A. in English from Northeastern University.
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