A high-interest savings account earns attractive rates but typically doesn't have debit card or check-writing access. The main reason to open a money market account is to have a higher interest rate compared with a traditional savings or checking account, while also having the ability to write a few checks.
If you don't have a lot of money to start with, a savings account makes sense because it's possible to find accounts that don't require minimums. If you want to earn a higher APY and you can meet a higher account minimum, a money market account is a good choice.
Money market accounts are insured by the Federal Deposit Insurance Corp. (at banks) and the National Credit Union Administration (at credit unions), so you won't lose your deposits even if the financial institution goes out of business.
That's because they can invest in low-risk, stable funds like Treasury bonds (T-bonds) and typically pay higher rates of interest than a savings account. While the returns may not be not much, money market accounts are still a pretty good choice during times of uncertainty.
Money market accounts usually require a higher minimum balance than regular savings accounts, sometimes as much as $10,000, according to Bankrate.com. You can be hit with a hefty fee of as much as $25 if your balance falls below the minimum. You can incur a penalty for writing too many checks.
Most financial experts end up suggesting you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000. Personal finance guru Suze Orman advises an eight-month emergency fund because that's about how long it takes the average person to find a job.
Money markets provide temporary safety during a recession with short-term, low-risk securities.
Most money market accounts have a minimum balance of at least $2,500 (although some have lower minimums, as low as $1). If your account drops below this minimum, you may be subject to fees and other costs that can quickly deteriorate your funds and any added perks that the higher interest rate provided.
Look at Minimum Deposit and Minimum Balance Requirements
Most money market accounts can be opened for between $500 and $2,500 initially, and many will require the same amount for a minimum balance or you will pay penalties or maintenance fees.
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