Money Markets vs Savings Accounts

When you're reviewing your options in how to invest those hard-earned dollars, a money market or savings account can help you create a strong financial future. A high performance money account will help you snag a competitive interest rate, and even have access to withdrawals and other benefits. A savings plan can serve as the foundation of your financial strategy, and although it may not offer high interest in most cases, it will help you organize your finances much better.

Money Market accounts are insured by the Federal Deposit Insurance Corporation; this means you'll be securing your dollars in a safe place, regardless of any business issues or bankruptcies by the financial institution. These accounts are setup in a similar fashion to savings accounts, but limit the withdrawals per month. Because of these restrictions, these accounts will offer some very attractive interest rates. Banks are interested in setting up these types of accounts because they have the ability to lend that money to other people and earn interest. You'll earn a small amount of this interest after your initial investment, but be forewarned that too many transactions will result in fees and penalties. Money market accounts typically have higher minimum balance requirements.

Savings accounts are more liberal with transaction limits, and seldom require fees and penalties for withdrawals. Many savings accounts can also be setup with a checking account, making it very easy to withdraw money from an ATM or using a debit card. Savings accounts will have little or no balance requirements, and can even help keep that checking account up to date. Many banks will tie-in your checking and savings account; in a situation where there are no funds in your checking account, the appropriate amount will be will be automatically transferred from the savings account.

The key differences between money markets and savings accounts are:

• Money markets often have higher minimum balance requirements
• Money markets offer attractive and competitive interest rates
• Savings accounts seldom require minimum balances
• A savings account can be attached to a checking account for easy withdrawals and transactions-often with unlimited transactions and no fees
• Both accounts are usually insured by the FDIC