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Step 1
Learn what money market funds are and how they work. A money market fund buys securities like U.S. Treasury bills, other government securities and corporate bonds. For the most part these are short-term securities with maturities of 90 days or less. The value of your shares in a money market fund is more or less fixed—you can expect to get $1 back for every dollar you put in, plus the interest. Risk is minimal because the corporate and government departments held by the funds are extremely stable. Most good funds also pledge to maintain the value of your shares. One of the most attractive features is the ability to write checks on a money market account as long as your balance stays above the minimum. This enables you to move your money in and out of other investments easily and still earn interest on money held as a cash reserve. Use the link to "Kiplinger’s Personal Finance" to read more about money market funds.
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Step 2
Check with your bank to find interest rates on money market funds. Many banks have money market funds of their own and will be more than happy to provide you with current interest rates. In addition, many banks will help you find interest rates on money market funds of other companies and banks.
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Step 3
Look on the Internet for websites that list interest rates on money market funds. In addition to giving you the 7-day yield (current rate) most good lists provide additional information like minimum deposit requirements. Bankrate.com has an up-to-date listing of bank money market funds. Money-Rates.com maintains a listing of the funds with the highest interest rates. A very comprehensive list is available at Financial Week online. Links to all three sites are at the end of this article.
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Step 4
Check the websites of individual companies that manage money market funds. The website of a fund will give you up-to-date rates and full details of their funds. Most allow account holders to make transactions online as well. A link to Fidelity, one of the most prestigious money market fund companies, is provided below as an example.
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Step 5
Open a money market account once you find a money market fund that meets your needs. You want to find a fund that has good interest rates, of course. Another factor to consider is the minimum investment required, which can range from less than $1,000 to $25,000. Finally, consider including a money market account in your IRA as a way of earning interest on money not invested elsewhere.
