There are just a few places that you would want to stash away accumulated funds. The most common options are money market account and savings accounts.
The main difference between a savings account and a money market account is that it offers a higher interest rate. So this means a better return for the more money you put in. Many money markets accounts allow you to transfer money to other savings or checking accounts and also write checks.
Opening A Money Market Account
When opening a money market account keep in mind that most have a higher minimum deposit than just traditional savings accounts. Nowadays a lot of banks don’t require even a minimum to have a regular savings account.
In a Money market account with the benefit of writing checks, however, there is a limited amount of checks you can write. Also, there is a possibility of a debit card but a limited amount of transactions. Think of the perks of getting a higher interest rate account with the challenge of actually growing and leaving your money in there.
When looking for a Money Market account make sure you investigate the following:
- The Minimum deposit to open the account
- Ways you can access your funds-by check? Debit cards?
- Amount of transfers or transactions allowed during a certain period
- Balance and maintenance requirements
- What are the types of Fees? Fines? Or Penalties?
Opening a Savings Accounts
Savings accounts are a quick and safe way to store money away along with your checking account. When applying for a bank account at a bank or credit union, savings accounts are offered as a pair. Savings accounts are highly more liquid than any other accounts to store extra money. Even though most traditional savings accounts are low they still earn interest. So if you are saving to is purchase in the future or rather let it grow over time, try opening a savings account. Unlike Money market accounts the interest rate though low is more likely fixed. With a Money Market account, the interest rates are common to change.
My Picks of Online Banks that offer Higher Interest Rates on Traditional Savings Accounts
- $5 minimum to open account
- APY 0.55%
- No minimum to open account
- APY 1.00%
- No minimum to open account
- APY 0.65%
How to decide which one to choose?
If you wanted to start saving for the first time and you had to choose one I would say go with a traditional savings account. It’s better to not have to wait for a minimum to start saving and also worry about the fees. A savings account is good for short-term goals. For example, like a holiday fund or a Weekend Trip. Something you don’t need to earn too much interest from and can withdraw when you need to easily.
When deciding to go with a money market account it’s better if you have a substantial amount of money. Since the rate varies but would be much higher is better to deposit a minimum of at least a thousand. Then after the return will be greater as you continue to deposit more funds.
If you want to be able to write checks from a savings account then a money market account comes with those benefits. As mentioned before some come with a debit card, so you can make other transactions.
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How to Start Saving Money and Why you Should
When deciding on choosing a savings account or a money market account it first depends on the amount of money you have to save. Then how often or when do you want to access it. Remember Money market accounts have limitations but you can write a check or use a debit card. Savings accounts are more fluid by the ability to transfer to your checking account to use, with fewer limitations. You won’t be able to write checks directly from the account or attach a card with it. You would have to transfer it to have access. Savings accounts mostly don’t have a minimum and are good for short-term goals. Money market accounts have a higher minimum and are good for long-term goals.