How do I Compare Money Market Vs Savings Accounts?

Felicia Dye
Felicia Dye
A savings account book.
A savings account book.

Two investment options that Americans often compare are money market vs savings. A money market account is a professionally managed fund in which a depositor’s money is invested in safe, conservative, short-term investments. A savings account is a deposit account that offers the depositor a specified amount of interest on invested funds. In some ways, these two types of accounts are different, but in other ways they are quite similar.

One difference between is accessibility. It is extremely rare to find a bank that does not offer some sort of savings account, but it is possible that certain banks may not offer money market accounts. This may be especially true for people in rural areas who have limited access to national banks. If someone is interested in investing in the money market and his bank does not offer the option, he may have to inquire with mutual funds or brokerage firms.

When comparing money market vs savings, it is also necessary to consider the amount available for investment. Most banks have savings accounts that can accommodate depositors who only have small amounts of money or who are unlikely to maintain high balances. Money market accounts usually require a certain amount to begin investing. For many, the amount required is restricting.

Some savings accounts have minimum balance requirements. When the account holder’s balance falls below that amount, he is normally charged a fee. When investing in the money market, account holders are almost always subject to minimum balances.

Other fees to consider when weighing money market vs savings accounts are management fees. With savings accounts, the depositor generally manages all account activity. When a depositor invests in the money market, he is essentially placing his money in the care of a financial professional who devises the best means for satisfactory returns. For performing these tasks, the depositor generally forfeits a percentage of his gains.

Some banks do not charge anything for savings account transactions. Those that do charge are likely to allow a certain number of free transactions per month. Money market accounts are usually less generous in this regard. Some money market accounts also allow free transactions but usually fewer are permitted. Another thing to consider is that money market accounts often restrict the number of transactions even if the account holder is willing to pay.

The return that a depositor can expect is probably one of the biggest determining factors when comparing money market vs savings. Neither of these types of accounts is recommended for long term investing if a depositor’s goal is high return on his money. With a savings account, the depositor is informed how much interest he will earn before putting funds in. With a money market account, there is the potential — but not a guarantee — for higher earnings. The depositor, however, is not aware what his return is going to be when he invests.

There is also the issue of security. A substantial portion of savings deposits in the United States are insured by the Federal Deposit Insurance Company. Funds invested in the money market are usually not insured, but the Securities and Exchange Commission, created by Congress, does regulate the market and aim to protect investors.

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    • A savings account book.
      A savings account book.