Money Market and Savings accounts can be very similar but are also different in many ways, so it’s important to know the difference before you decide where to keep your money. Both are good options based on different criteria and what works best for you and your financial goals. So, what’s the most effective way to save?
What is a money market account?
A money market account is a specific type of savings account but has some features you won’t find in a standard savings account.
- Money market accounts often have a higher interest rate than traditional savings or checking accounts.
- You can make an unlimited number of deposits into a money market account.
- These accounts typically allow you to withdraw funds up to six times per month for certain withdrawals. You can access funds with a debit card, ATM, or by check.
- They offer immediate access to funds if you face a sudden dilemma, which is a plus if you are looking to set up an emergency savings fund.
- Opening deposit requirements and minimum balance requirements are typically higher.
Minimums and fees to open and hold a money market account differ among institutions, but you should be aware of minimum deposit requirements for both opening an account and earning the APY. Also look out for monthly fees, transfer fees, inactive account fees — really, anything that could result in a penalty based on the institution’s account criteria.
If you have a large balance and plan to keep enough money in your account to avoid fees, a money market account might make sense for you. It is also a good option for maintaining liquidity and growing your savings over time.
How is a savings account different?
While very similar in many ways, a traditional savings account might be a better fit for someone with a smaller balance or who is just getting started building their savings. A few things that differentiate savings accounts from money market accounts include:
- You can’t use a debit card or write a check to withdraw from your savings account. You’ll need to transfer them to another account or visit the bank.
- The minimum opening deposit and minimum balance are likely to be lower. There may even be no minimum balance requirements.
- There are more limitations to accessing your money as easily as a money market account.
While money market accounts are typically known for having higher interest rates because of higher minimum balance requirements, the ability to find competitive interest rates for savings accounts is increasingly common, especially with online-only banks.
If you don’t plan to touch your money often, or are building funds for a long-term goal, a savings account might be the right choice for you — especially if you have any concern about minimum balance requirements.
Making a choice.
While it may be best for you and your financial goals to choose a money market account over a savings account or vice versa, you can also choose both! This can help you achieve different savings goals at the same time. For example, maybe you want to keep funds in a money market account to be easily accessible for short-terms savings goals, such as holidays, vacations, etc. On the flip side, you can set up a savings account for longer-term goals such as college savings where the money can generate over time.
Whatever you choose, Money Market and Savings accounts are great options and saving anything you can is better than not saving at all. If you have questions about setting up your money market and savings accounts, our expert bankers at Republic Bank are ready to help. Give us a call at 800-526-9127 and visit our website for more banking and financial tips.