The Benefits of Money Market Accounts

Money market accounts are a form of personal savings that is a step above regular savings accounts. Money markets are classified as investments because they offer more benefits relating to equity investments rather than cash accounts.

Higher Yield

Money markets generally have a higher yield than a regular savings account. While a normal savings account earns 1 percent to 2 percent in annual interest historically, while money markets have earned 3 percent to 5 percent historically, according to Bankrate.com.

Diversification

Investors usually seek diversification in their portfolios, placing some of their cash in a money market. Money markets allow investors to park some cash and earn a decent yield, without the fear of losing their principal.

Limited Withdrawals

Another positive aspect of money markets is the limited amount of withdrawals or checks that may be written on the account. This encourages investors to leave their money in the account, earning more interest over time.

Very Liquid

Although money markets are classified as investments, they are still highly liquid cash investments. Money markets can be transferred into regular bank accounts or withdrawn for emergency use.

FDIC Insured

Because money markets are investment accounts offered by banks, they fall under the Federal Deposit Insurance Corporation (FIDC) bank safety regulations. This protects an investors cash deposits up to $100,000 in case of bank failure.

References

• Income Invest Home: What are the Advantages of Money Market Funds
• Care One Credit: Money Market Accounts
• Bankrate.com