What is a money market account and how does it work?  I’ve had one for many years and I have my emergency funds stored in it along with other monies.  These types of accounts are interest bearing and are available at banks and credit unions.  They are not tied to the stock market.  The only ties they have are to the Federal Reserve when they increase or lower interest rates.

So, what is different about a money market over a savings account?  First of all, they normally pay a much higher interest rate than a regular savings account.  As of this writing, mine is paying 3.85% vs. the 0.10 my regular savings account is paying.  That’s a significant difference by the end of the year.  Additionally, for some money markets, the rates can vary depending on how much your balance is.  In other words, the more money you have, the more interest they will pay.  I don’t have one of those.

Most money market accounts require a minimum deposit to open the account.  You should maintain at least your opening balance.  If your balance goes below the minimum, you might incur a fee or make less interest.  You do need to be aware of the terms of your account.

With a money market account, the Federal Reserve set rules.  Because of previous federal regulations, you can normally only make up to six withdrawals or transfers every month.  Some money market accounts offer checks and/or debit cards. The one I use has a debit card that I almost never use.  It doesn’t offer checks.  But I do have a checking account at the same bank and I simply transfer money into that when I need to write a check.

You might wonder if these accounts are FDIC/NCUA insured.  Yes, they are.  They’re insured just like any other savings account up to $250,000 per institution and saver.

Moral of the story:

If you have emergency funds, or other monies that you don’t need on a regular basis, I highly recommend you open a money market account.  Your money will grow faster due to the higher interest rates and that’s a great option.  Last year, I earned over $2,000 in interest in my account and I’ll take free money anytime.  LOL