money market accounts

Find the Best Money Market for You

Whether you choose a money market fund or account largely depends on the money's purpose.

Two kinds of money market vehicles are money market mutual funds and money market deposit accounts. For those looking for a place to park cash, the difference is often a point of confusion. Banks and credit unions offer the deposit-account version, usually called a money market account, or MMDA. These accounts come without market risk and are protected by the Federal Deposit Insurance Corp. (see Are Your Bank Deposits Insured?). The mutual fund version—often called a money market fund, or just money fund—holds such short-term investments as Treasury bills and other government securities, commercial paper, and certificates of deposit. Money market funds are low-risk—but they don’t match the safety of money market accounts, and they are not FDIC-insured.

Starved for yield. The Federal Reserve lopped short-term interest rates to near zero earlier this year, and in response, money-fund yields have fallen more quickly than those of money market accounts. “Yields on bank deposits tend to lag the Fed, and that’s a benefit when rates are going down,” says Peter Crane, president of Crane Data, which tracks money market funds. As shown in the tables, you could recently get as much as 0.6% on a taxable money fund, 0.32% on a tax-free fund and about 2% on a money market account. Taxable money market funds recently had an average 30-day compound yield of 0.09%, and tax-free funds yielded 0.05%, according to iMoneyNet. Money market account yields averaged 0.09% on balances of less than $100,000, according to the FDIC.

The decision of whether to use a money market fund or account largely boils down to the money’s purpose. For emergency savings or other cash that needs to be safe and readily accessible from your bank, a money market account makes sense. Money that you may want to quickly move into the market—say, to scoop up stocks at low prices during a dip—is often best parked in a money market fund linked to the rest of your investment portfolio.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022

Recommended

TOD Accounts Versus Revocable Trusts – Which Is Better?
savings

TOD Accounts Versus Revocable Trusts – Which Is Better?

Both help you pass down assets while avoiding the time and expense of probate, but one comes with a lot more flexibility than the other.
December 2, 2021
Earn 7.12% With Series I Bonds
Basics

Earn 7.12% With Series I Bonds

A savings or money market deposit account is best for quick cash, but I bonds can fit into a longer-term savings plan.
November 29, 2021
10 Best Financial Benefits for Military Families
savings

10 Best Financial Benefits for Military Families

Service members face a range of threats – from the lethal to the financial. A wide array of generous benefits and programs are meant to offset some of…
November 9, 2021
Spending Like It’s 2019
Smart Buying

Spending Like It’s 2019

Setting spending targets and using budgeting apps can help tame the urge to live it up (now that we can again).
October 27, 2021