While opening a traditional savings account may be easy and something you do routinely when opening a checking account, there are a variety of other savings options available. One of these other savings options is a money market account. Here are some of the most important things to know about money market accounts and how they differ from a traditional savings account.
Money market accounts are usually established for long-term savings plans. Instead of using this a revolving account that money goes in and out of, a money market is set up to help establish a savings routine and planning for long-term expenses or savings such as for retirement, to purchase a home or other investments.
A minimum balance is traditionally required to open and maintain a money market account. There are a wide variety of money market accounts available depending on the bank or credit union you work with. Each of the accounts may have a different minimum requirement.
A money market account usually earns interest at a slightly higher rate than a traditional account. Because a money market account usually has a set minimum balance you must maintain they financial institution can offer you a higher interest rate on your investment.
Money market accounts usually allow access to your funds at your financial institution. The bank can then use your funds in lending to earn additional money for the bank. This is one reason the interest rate offered to you is higher as well.
Another difference between a traditional savings account and a money market account could be the number of transactions you are allowed. Money market accounts often have a limit on the number of transactions you can do each month. If this is a concern to you be sure to find out the details when deciding on what account you want to open.
One feature you will find on a money market that you can also find on a traditional savings account is online banking access. This feature is great for checking balances, making transfers, and even being able to download transactions into your financial management software.
Whether you decide to go with a traditional or a money market account the reality is that making a savings plan and sticking with it may be the harder part. Just having an account designated for savings is not enough, you have to be self-disciplined enough to begin making saving a priority, adding to the account regularly, and resisting the urge to pull out funds for other purchases. Once you see the account balance increasing this becomes easier and saving itself becomes its own reward.