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What Are the Best Tips for Money Market Management?
Money market management does not tend to be a complex process. This type of investment is, in essence, a savings account with a few additional restrictions and slightly more yield. Understanding the terms of the account and being vigilant of things such as fees, restrictions and policy changes are usually sufficient for successful money market management.
One of the best tips for money market management is to ensure that all account requirements are met so that additional fees can be avoided. This includes knowing and adhering to the minimum account balance and the maximum number of withdrawals per month. Investors can track these things via a money management computer program or by simply regularly updating the paper register that comes with most money market checks.
It also can be useful to know what restrictions and fees are attached to making deposits and withdrawals. Some funds charge a fee for all electronic transfers. Others might charge a fee for each transaction made when the account balance is below the required minimum amount. Many funds allow deposits from automated teller machines (ATMs), but there might be a fee for that service.
Another important element of money market management is to have a clear understanding of the purpose of the account. An investor should determine whether it is meant to be a place to keep long-term savings, emergency funds or money set aside for specific purposes. Understanding how the account is to be used can increase the ease of managing the investment and make it easier to determine what and when to invest and on what sort of a schedule withdrawals are best made.
Funds must inform their customers of any policy changes. By reading all literature from the company, an investor can maintain current knowledge of the best practices to follow in regard to money market management. This includes new fees, restrictions and other changes that might happen periodically.
Good money market management also includes steadily increasing the value of the account. The best way for a customer to do this is to make regular deposits. A typical fund will offer automatic monthly withdrawal from a checking or savings account.
Another aspect of good money market management is the periodic review of other available money market funds. This is done primarily to ensure that the interest rate is a competitive market value. If it is consistently lower than the market average, then it might no longer be a desirable fund in which to invest.
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Discussion Comments
I have a money market account at a mutual fund company. One of the biggest differences between withdrawing funds from a mutual fund and a money market account are the tax implications.
If you withdraw mutual funds, you have have to record the sale of the mutual funds and pay any capital gains tax you have acquired.
While you still have to include any interest earned on your money market account, you don't have to record each withdrawal as an actual sale of funds.
There is also more flexibility when it comes to taking out any money. I have a checkbook that is linked to that account, so I can also write a check on the funds when needed. There are times that this has been very convenient.
I have kept some funds in a money market account for quite a while. While you get a slightly better interest rate, it really doesn't make that much difference if you have a small balance.
What I like about a money market account is that you have quite a bit of flexibility when you want to withdraw some money.
Our bank has some restrictions on how many withdrawals we can make in one month without being charged a fee.
If you have some extra funds that you aren't going to be using immediately for bills, having a money market account can give you a little bit better return than a regular savings account.
@Cafe41- I understand what you mean, but some people like the idea of a money market account because they view it as a savings account and want to separate it from everything else. I have a money market for this reason and I make deposits every week from my online banking account.
My account is steadily growing and while it pays a paltry .40% interest, I like that I can see my balance and see the impact of my savings. I think that if it my money would be mixed in a larger checking account it would not have the same impact because money would be coming and going.
At least with this type of account, I can continually add funds to it which really motivates me to do more.
I think that money market accounts have some utility, but it is best to shop around for the best rates. Although many of these accounts offer low interest rates there are some credit unions that offer better rates on their high yielding checking accounts that might be a better alternative to a money market account.
For example, my credit union offers a high yield checking account that pays a yield of 2.0%. You do have some conditions that you have to adhere to like making so many debit transactions along with having direct deposit, but there is no minimum balance and you don’t have any check writing restrictions like you do with a money market account. For me this is a much better choice.
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