If you’ve heard of a money market account, you know that they give you a better interest rate than you’d get from a traditional savings account. However, you’re probably also aware that in order to get this higher interest rate you must have a minimum initial deposit of at least $2,000. You might also know that if your account dips below that number, you’ll get charged a small fee.
All this information leads to a big question—why would someone want to open a money market account? What goals might someone have that would be best served by them putting their cash in one?
Best Uses for a Money Market Account
Money marketing accounts are a great option for storing a larger sum on money, plus it's an account that allows your to add funds to it regularly. This makes it an ideal savings account for achieving many types of financial goals.
Storing Your Emergency Fund
All the features of a money market account make it an ideal place to store your emergency fund once you’ve got enough to cover the initial deposit. Think about it—you want to keep building up your emergency fund, but you ideally won’t be withdrawing much money from it.
Even better, the higher interest rate will let you grow the money you have in it faster than you would with a traditional savings account. You won’t get rich with this interest rate, but over the years you will have more money to use in case of an emergency.
Saving for a Long-Term Goal
You should also consider opening a money market account if you’re saving for a long-term goal. Similar to an emergency fund, you’ll be putting money in your savings account for several months, perhaps even years, before withdrawing it. During that time, you can take advantage of the higher interest rate, and you won’t have to jump through any hoops once you’re ready to withdraw your cash.
Common Uses for Money Market Savings Accounts
Here's a few examples of long term savings goals that people often use money market accounts for:
- Down payment on a house
- Property tax payments
- Vacation funds
- Wedding funds
- Home remodeling funds
- Annual or irregular expenses
- Vehicle repairs or maintenance funds
A money market account is also a great place to have your tax refunds directly deposited. It will allow you to plan ahead for the best ways to make those funds work for you because you can easily access the money at any time.
An Alternative to Investing
If you have some funds you’d like to invest but you’re not sure where, do yourself a favor and put them in a money market account while you research your options. You’ll still get the satisfaction of having your money earn money, and once you’re ready to transfer your money into an investment you won’t have to wait and potentially pass up a good opportunity.
You Want People to Think You’re a Financial Genius
Admit it—"money market account” sounds a lot cooler than “savings account.” Almost everybody has a savings account, but when you say you have a money market account, people will wonder if you’re secretly a financial guru with information they can only dream of accessing.
While you definitely shouldn’t use your newfound status to recommend any hot stock picks, you might want to tell them about the advantages of opening a money market account. You’ll be doing them a favor and increasing your reputation as someone who knows a lot about finances. Don’t be surprised if you find yourself buying a tweed blazer and reading the First Alliance Credit Union blog to get more nuggets of financial wisdom you can pass along.
Open a Money Market Account
Money market accounts have several uses, from storing your emergency fund to helping you achieve a long-term goal. If you’d like to open one, become a member of First Alliance Credit Union today and talk with a member experience advisor. They’ll talk with you about your savings goals and make sure a money market account is the right savings option for you.