While both have the shared goal of helping you grow your savings, a money market account and fund are quite different in how they work and what they offer. Knowing the key differences can help you choose the right option for your financial situation.
The differences between money market accounts and money market funds
Money market account:
- Offered at a bank or credit union
- Considered low risk, as the principal is protected by deposit insurance (e.g. FDIC or NCUA insurance funds)
- Easy access to funds, often with check-writing and debit card privileges
- Money is held as a deposit, not an investment
- Typically offer higher interest rates than regular savings accounts, but generally lower than money market funds
- May have monthly fees, which can typically be waived by meeting minimum balance requirements
Money market fund:
- Offered at brokerage firms and fund companies
- Not deposit-insured, but may be covered by SIPC (Securities Investor Protection Corporation) when held in a brokerage account
- Considered low risk, but not risk-free as the value of the fund can fluctuate
- Funds are accessed by selling shares, which may take a day or two to process
- Money is invested in short-term, low-risk securities
- Generally, offer higher returns than money market accounts, but also come with some risk
- May have expense ratios, which are fees charged to manage the fund
Which option is right for you?
A money market account works well if you are seeking the security of deposit insurance and consistent interest rates, especially for emergency funds.
Money market funds work well if you are seeking to capitalize on investment or market opportunities with somewhat higher risk.
To learn more about a money market account, speak with a banker or financial advisor today.
