Everybody would love to become a master of savings by paving a way to a rock-solid nest egg. However, for most of us, this is a road less traveled and we wonder how to get there. If this is the case for you, you may want to consider opening a money market account.
Don’t know what a money market account is? A money market account is a type of savings account that typically comes with a higher dividend rate than a standard saving account but requires a higher minimum daily balance. The amount of check writing and withdrawals is limited with a money market or any savings account due to federal regulations. On the plus side, you do have access to your funds at any time, which is different from a share certificate or certificate of deposit that ties up your money for a set period of time. However, because of this, certificate dividend rates are usually higher than money market rates. Below, find a quick and easy breakdown of these three money-savings options.
|Typically higher dividend rates compared to savings or checking||Low dividend rate||Higher dividend rates|
|Variable rate||Variable rate||Fixed rate through the length of the term|
|Limited number of withdrawals per month||Limited number of withdrawals per month||Penalty for early withdrawal|
|Limited check writing and access to ATMs||No check writing. Access to ATMs||No access to your funds through checks, ATMs|
So what route will you take?
It depends on your needs, both immediate and future. Here are a few examples of when it might be a good time to consider opening a money market account.
- You have more money in your savings account than you need on a regular basis. By moving a lump sum over to a money market account, you can earn more for that money.
- You sold a valuable item, such as a second car or antique, and want that money to grow faster, but you might need to use it in case of any emergency situation.
- You want to diversify your savings by having funds in a variety of accounts.
- You received unexpected money as a gift or inheritance. You may need access to it but want to earn the most on it right now.
Take a look at your finances and goals, and make sure you are headed in the right direction to get the most out of your money.
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