Money market accounts are another savings tool offered by your bank. The interest rate on a money market is higher than a savings account. It may vary according the market rate. The money market account usually has a much higher minimum balance requirement. It is important that you do not open this account until you can meet that requirement, since you cannot earn interest on the money and will be penalized with fees.
A money market account will allow you to write checks on the account. Generally the number of checks is limited to about six. You may additionally have six other withdrawals on the account. Since there are a limited number of withdrawals a month, you should view this more as a savings account rather than as a checking account.
Money market accounts through your bank are insured by the FDIC for up to $100,000. Money market accounts are one of the better savings tools that your bank has to offer, because of the easy access to your money and the higher interest rates. These accounts are a great place to put your emergency fund of three to six month expenses. Though you may put some of that money into Certificates of Deposit. Additionally you can save for large purchases with this account.
Once you are ready to begin investing you should look elsewhere to put your money. This account will not bring you large returns each month. However it is a good place to park money that you will need to access in the next five years. It just won’t make that money work really hard for you.
