In most cases, a money market account would be the best option, but nowadays, there are excellent options for savings accounts as well. Here’s how to choose one of the two.
If you have lived to be your age, but still have not learned how to save some money from your salary and put it in a savings account, then do not worry, only 30 percent of Americans do it regularly. In our opinion, we should have been taught such things at school. However, unfortunately, this did not happen, and therefore it is not at all a shame to independently understand this issue now. For our part, we only offer you assistance in money management.
If you agree not to waste all the money at once, but to think about the future, then this is already half the battle. Next, you have to choose between a money market account vs a savings account. Let’s figure out what the trick of each of the methods is.
What is a money market account vs savings account?
- A money market account (in the shorter version is MMA) is a special account that resembles a savings system but has a number of differences.
It works as follows: you invest a certain amount of money saved by you (taking into account the minimum balance amount), and then the bank invests your funds in something else, and you receive additional interest on the profit for the so-called temporary lease of this amount.
If you think this is not entirely safe, then do not worry in vain. Even a bank declared bankrupt is obliged in this case to return the amount of the deposit to you, of course, up to a certain point, so it is advisable to find out this limit in advance and not exceed it.
Pros and cons of money market account vs savings:
A plus can be called the fact that it is easy to get access to the invested funds. Interest can even go directly to your debit card and in which case you can easily pay off with it. Inflation is unlikely to have a big impact on the bottom line. Thus, you can understand that the liquidity of MMA is extremely high. Although there are also conditions at some banks, implying the ability to withdraw money only after a certain time (days or weeks).
Another significant advantage can be considered what, as we mentioned above, namely the security of your contribution, guaranteed at the Federal level.
The downside is that in this way you will not save yourself up for a comfortable old age, incomes will be too low, however, the situation with a complete lack of money does not shine for you. This account can also be used on a rainy day.
A significant disadvantage of a money market account vs savings account comparison is the need to first deposit and then leave a certain minimum amount of money in the account until the end of the contract. That is, if you have about a hundred dollars in hand, you will have to save some more time until your deposit amount grows at least up to $ 500 – $ 1000, depending on the bank’s requirements.
Another disadvantage, we believe, is that the number of possible withdrawals from the account per month is strictly limited. Banks often offer you about 6 transactions within 30 days. This is also worth thinking about.
- A savings account is an account with a bank that enables you to receive interest on your deposits. Interest is paid specifically for keeping money, for the balance and replenishment of the account. There are two options for opening such an account: through online registration and through a regular local bank. Savings account vs money market rates will be significantly lower due to the fact that you will have access to your funds at any time.
When you apply for a savings account online, interest rates generally remain higher due to the low cost of banking expenses.
Pros and cons of bank savings account vs money market:
Of the advantages, one can especially highlight the security of a savings account with a higher limit than that of MMA, which can even reach half a million dollars.
Also, the advantage lies in higher liquidity, which we have already mentioned.
But the most important thing, in our opinion, is that there is no need to accumulate an amount equal to the required minimum balance. If you just need to make a big purchase soon, then use the savings account option.
There is only one minus, but it is very serious – very low-interest rates for depositors. Often they do not even reach one percent.
We would still advise you to collect a certain amount and put money into an MMA account, and then wait for a little and get a large amount of savings, then put money at such a meager percentage. Well then, the choice is yours. Good luck!