If you’re an adult who has some experience with saving and investing, you probably have a good idea about whether a money market account is right for you. You’ve weighed the pros of a higher interest rate against the cons of the high initial deposit, and you can think of ways a money market account could be useful.
If you’re in your twenties and just starting your career, though, the answer can be less clear. While you’ll probably be able to save up $2,000 for the initial deposit, is a higher interest rate worth tying up that much money in a savings account? Do the disadvantages of a money market account outweigh the benefits?
In other words:
Are money market accounts worth it for twentysomethings?
As with most financial tools, the answer is “it depends.” There are several situations where opening a money market account can help Gen Zers out immensely, but it all depends on the state of your finances and your goals.
Money Market Accounts can Help Gen Zers who are Saving for a Financial Goal
If you’re saving for a financial goal, you’ll probably be putting away money in a savings account for months, and sometimes even years. Why not put that money in an account where it will earn more? This will help you reach your financial goal faster, and once you’re ready to use that money you won’t have to jump through any hoops to withdraw it.
What is a money market account used for?
One of the benefits of a money market account is that you can use it to save money for many different goals, such as:
- A down payment on a car
- Rental deposit for an apartment
- New furniture
- Unexpected financial emergencies
- A summer vacation
- An extended weekend at a music festival
Get started setting financial goals today!
Gen Zers can use Money Market Accounts to Store Their Emergency Fund
No matter what age you are, a money market account is a great place to store your emergency fund. After all, you’ll want to keep putting money into your emergency fund, but you ideally won’t have to withdraw much money from it, but you need to be able to access the account easily when an emergency arises. Once you've saved up enough money to meet the minimum balance requirement for a money market account they make a great option for storing an emergency fund.
Even better, the high interest rate of a money market account means the money in your emergency fund will grow faster than it would if you kept it in a traditional savings account. Granted, you won’t get rich, but you will have the satisfaction of knowing you’ll ultimately have more money at your disposal if and when an emergency strikes.
Money Market Accounts are a Good Introduction to Investing
While a money market account is obviously meant for saving money, it’s also a good way to dip your toes in the waters of investments. This might sound crazy at first, but think about it—you need to have a significant amount of money saved, and while you’re getting a better interest rate, you can only get it if you keep that money in your account.
However, money market accounts have two big advantages over investment accounts. First, there’s no risk involved in opening a money market account, so you never have to worry about losing money. Second, the funds in a money market account are liquid, so you can withdraw them as easily as you would from a checking account.
All these features make money market accounts an ideal introduction to investing. Gen Zers can get experience watching their hard-earned money grow without having to worry about how the markets are doing or whether the company in which they invested is performing well. Even more importantly, they can look at other investment opportunities and weigh their pros and cons against simply keeping their funds in the money market account.
Questions about money market accounts? Ask us!
Open a Money Market Account at First Alliance Credit Union
Why get a money market account in your twenties? As it turns out, there are a lot of reasons. A money market account will help familiarize you with investing, it’s a good place to store money for a financial goal, and it’s always a great place to store your emergency fund.
If you’d like to take advantage of all the benefits a money market account offers, become a member of First Alliance Credit Union today. You can open a money market account with a $2,000 initial deposit, and from there you can add more money to build up your emergency fund, use it to save for one of your goals or just log into your mobile banking account and track the money in your account as it grows.