Savings vs. Money Market Accounts

Some financial decisions are harder than others. Do you go for a 15-year or 30-year fixed-rate mortgage? Purchase a new car or a used one? Do you go back to school in your 40s and hope you receive a higher salary to offset the cost of a college education?

On the other hand, some financial decisions are a little easier — like choosing between a savings account or a money market account.

The Accounts

You probably know what a savings account is. It’s the safe place your parents always told you to keep your money. Your bank or credit union pays you interest on the money in your account — even though that interest rate is a bit low.

The Federal Deposit Insurance Corporation or National Credit Union Association insure savings accounts, up to certain amounts, so that you won’t lose money if your bank or credit union falls into financial ruin.

Money market accounts are very similar. Like a savings account, it’s safe and protected. But there are a few differences.

Money Market Accounts

Money market accounts usually require consumers to maintain a higher minimum balance. They also might be more flexible, allowing you to write checks and quickly access the money in your account against the dollars you’ve deposited in them.

The biggest benefit of a money market account is that they usually pay out higher interest rates on the money you’ve saved. Traditional savings accounts, on the other hand, usually require that you maintain a lower minimum balance and don’t come with checking options. Plus, savings accounts pay a lower amount of interest.

Bottom Line

For most of us, there isn’t much difference between savings and money market accounts. The rates on these accounts are still fairly low when compared to other investment options, but they are safe places to keep your money.

If you’re someone with a large amount of money to deposit who would prefer the flexibility to write checks against your savings, a money market account is probably for you.