Money Market Accounts

Money market accounts are for families that are already established in their family savings and are ready to put a large sum of money away for a future event. Money market accounts are savings accounts that invest in government and corporate securities and pay the account holder based on current interest rates in the money markets.

A money market account tends to be for those with more substantial savings, because in order to avoid monthly fees a higher minimum balance is required. The payback is usually relatively high, but is purely based on the amount in the money market account as well as the state of the money markets.

What is a Money Market?

So you figured out what a money market account is, and how to start one up, but what’s the point? Why put so much of your family investments away in this one account that is not affiliated with the stock market? Well, the simple answer is continuity.

In the stock market there are two “types” of markets: a bull market and a bear market. A bull market is when the stock market is doing well and everyone makes money off their investments. A bear market is what we’ve been going through during this recession. A bear market can get to be too much for people who don’t want to take risks with their retirement and family investments. Therefore, they invest in the money market.

The money market specializes in very short-term debt securities and is extremely conservative. You have less a chance of losing money, but you also have less chance of making big bucks like you do in the stock market. The larger the gamble, the larger the payoff!

How to Money Market Accounts Work?

Along with requiring a high minimum balance – usually somewhere between $1000-2,500 – and having a higher paying interest, money market accounts also differ from regular savings accounts by the amount of withdrawals customers are allowed to take out. The average amount of withdrawals is usually no more than six, and only allow up to three checks to be written per month. This makes sense when you think about the fact that above all, a money market account is a savings account.

If a customer goes over the allotted amount of withdrawals allowed, they will incur a fee from the bank or credit union the money market account is attached to. Fees also will occur when the minimum balance is not met. Although the fees tend to be low – around $5-10 per transaction – they can add up quickly.

Remember, the interest you earn in a money market account is based on how much money is in the account. The more you put into the account, the more money you earn. This is especially handy for family finances that are looking to save as quickly as possible for retirement, college, family vacations or celebrations.

How to Avoid Money Market Account Fees

Although the fees in money market accounts pale in comparison to the charges for over charging a checking account, the end result is the same – losing money. The fees for money market accounts can add up. If you’re not careful your fees might bring you below the minimum balance requirements. No matter how careful people are, fees tend to happen. To protect you and your family, shop around for the best money market accounts. Things to look for in your accounts include: