The Money Market Fund vs Traditional Savings Accounts

If you are thinking about investing in a money market fund, there is a good chance that traditional savings accounts would also be an option for you. Both types of accounts carry with them some unique advantages and disadvantages. Here are a few things to consider about money market funds and traditional savings accounts.

Where to Get

One of the major differences between these two types of investments is where you obtain them. With a money market fund, you will be working directly with a financial broker or a mutual fund company. A money market fund is typically one of the mutual funds that is offered in a family of funds. With a traditional savings account, you will need to work with a bank. You can open a traditional savings account with any of your local banks or even an online bank.

Safety

Another difference between these two types of investments is the safety associated with them. When you invest your funds into something, you want to make sure that they are as safe as possible. Money market funds are considered to be a fairly safe investment because the fund invests in securities that are not very volatile. Even though money market funds are considered to be safe, they are not nearly as safe as traditional savings accounts. With a savings account, you are doing business with a bank. This means that the money in your account will be insured by the FDIC. If the bank goes out of business, the FDIC will step in and reimbursed you up to $100,000. This means that the savings account is going to be the safer of the two options when it comes to investing your money.

Returns

Something else that you will want to consider is the amount of return that you will get with each option. Most savings accounts offer a very low annual return when you invest your money. In most cases, you will be getting a rate that is less than 1% return. In some cases, you might be able to find a high yield savings account, but they are not very common. With a money market mutual fund, you will be able to bring in a greater annual return on your money. You should be able to get at least 1 to 2 percent more on an annual basis by investing with a money market mutual fund.

Accessibility

Another area that these two types of accounts differ in is accessibility of the funds. With a money market mutual fund, there will typically be some type of a provision for easily accessing your money. In most cases, you will have a checkbook that allows you to write checks against the money in the mutual fund. Typically, there will be a minimum amount for the check of at least $500. With a savings account, you will typically have to transfer the money to a checking account in order to access it. You can also make a cash withdrawal at the bank if you need the money.

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