With the Federal Reserve Bank bringing rates so low the last few years, finding a good place to put your money and gain interest can be fairly tough. Anyone who has money in a savings account, for example, is probably earning less than one percent on their money. That’s a disaster. Fortunately, a money market account represents a better return on investment with the same safety one finds in the traditional savings account.
Money market accounts generally produce better yields than savings accounts, but there are distinct tradeoffs. These accounts typically require you to deposit a minimum amount, which can be $1,000 or more. Many even require a minimum of $10,000, which is a hurdle for many savers. Then there are withdrawals…or the lack of them. Most money market accounts will limit you to a small number each month, between three and six. This may or may not be a problem, but it is vital that you know this before opening one of these accounts so you don’t end up without access to your money.
Is a money market account a good investment vehicle? Yes, so long as you understand the limitations that come with it.