Should I worry about my money market account?
Safety measures for money market accounts. First and foremost, money market accounts are typically safe because they're insured by the federal government. If you open a money market account at a federally insured bank, the Federal Deposit Insurance Corp.
There is no direct way to lose money in a money market account. However, it is possible to lose money indirectly. For example, if the interest rate you receive on your account balance can no longer keep up with any penalty fees you may be assessed, the value of the account can fall below the initial deposit.
As stated above, money market funds are often considered less risky than their stock and bond counterparts. That's because these types of funds typically invest in low-risk vehicles such as certificates of deposit (CDs), Treasury bills (T-Bills), and short-term commercial paper.
It might be worth investing in a money market account when you want a safe place to store your money with a higher interest rate than a checking account, while still having some liquidity features such as check writing. It's ideal for emergency funds or short-term savings goals.
Money Market Funds
Ultra-conservative investors and unsophisticated investors often stash their cash in money market funds. While these funds provide a high degree of safety, they should only be used for short-term investment. There's no need to avoid equity funds when the economy is slowing.
Disadvantages of money market accounts may include hefty minimum balance requirements and monthly fees — and you might be able to find better yields with other deposit accounts.
Yes, money market accounts are safe. The FDIC insured these products for up to $250,000 per depositor, per account ownership category. At credit unions, money market accounts receive the same level of protection from the NCUA.
CDs and money market accounts are equally safe. They are both insured accounts and will not lose value.
However, money market funds are not suitable for long term investment goals, like retirement planning. This is because they don't offer much capital appreciation. Money market funds appear attractive to investors as they come with no loads—no entry charges or exit charges.
While all money market mutual funds are considered relatively safe, most investors consider government money market funds safest, particularly those that own government-backed Treasuries, which greatly reduce the chances of a default.
Is it better to put money in savings or money market account?
Savings accounts generally lack the minimum deposit and balance requirements many money market accounts have. However, money markets typically offer higher interest rates than regular savings accounts, letting you earn more on your saved money.
Both money market accounts and high-yield checking accounts represent safe places to keep your money. They are insured by the FDIC, which means that if the bank declares bankruptcy, you won't lose your money. With either account, you can write at least a limited number of checks each month.
If you're using a money market account to save for emergencies, most experts recommend having six to 12 months of living expenses saved up. If you don't have a large amount to deposit at once, make your initial deposit, then set up automatic transfers into the money market account to grow your savings.
Money market funds seek stability and security with the goal of never losing money and keeping net asset value (NAV) at $1. This one-buck NAV baseline gives rise to the phrase "break the buck," meaning that if the value falls below the $1 NAV level, some of the original investment is gone and investors will lose money.
Where to put money during a recession. Putting money in savings accounts, money market accounts, and CDs keeps your money safe in an FDIC-insured bank account (or NCUA-insured credit union account). Alternatively, invest in the stock market with a broker.
1. Federal Bonds. The U.S. Treasury and Federal Reserve (Fed) would be more than happy to take your funds and issue you securities in return. A U.S. government bond still qualifies in most textbooks as a risk-free security.
Indirectly losing money, however, is a downside of money market accounts. Indirect loss can occur if the interest rates tied to the account fall, thus diminishing the initial return value of your account.
Money market accounts and savings accounts are equally safe places for consumers to keep their savings. However, it's important to open accounts at banks that are covered by FDIC insurance. You can check if your bank is FDIC-insured here.
Consumers looking to earn high interest on their savings while retaining easy access to their cash are often torn between high-yield savings accounts and money market funds. “They're both very, very safe and offer liquidity,” said Greg McBride, chief financial analyst at Bankrate.
You could lose money by investing in a money market fund. An investment in the Fund is not a deposit of the bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Money market funds are not subject to credit risk, but will have interest rate risk.
What does Dave Ramsey say about money market accounts?
I suggest a Money Market account with no penalties and full check-writing privileges for your emergency fund. We have a large emergency fund for our household in a mutual-fund company Money Market account.
While MMAs are generally considered very low risk, you can lose money in these accounts under some circ*mstances. One way to lose money in a money market account is to incur more fees than the account earns in interest income.
Vanguard Treasury Money Market Fund
This fund only invests in US Treasuries and repurchase agreements insured by the federal government, making it among the safest in a category of relatively safe investments.
| BANK | APY | MONTHLY MAINTENANCE FEES |
|---|---|---|
| DISCOVER BANK | 4.15% | $0 |
| EVERBANK | 4.75% | $0 |
| FIRST FOUNDATION | 4.90% | $0 |
| FIRST INTERNET BANK | 3.77% | $5 |
A money market fund is essentially a type of mutual fund that holds other securities, such as U.S. Treasurys and corporate bonds. The nature of these securities is usually short-term and the focus is conservative growth, rather than aggressive growth.
