Why You’ll Want Money Market Rates

If you’re a thoughtful investor, you probably did your research on interest rates before you started looking for ways to save your money. Ideally, you consulted with banks and professionals about what arrangement would work best for your current financial situation, and you probably already have an amount set aside for your future – and that amount is growing. But even if you’re already set up with an independent retirement account and/or savings account, you may be missing out on opportunities to save even more money in the long haul with just a little more risk and a lot more reward by exploring money market rates.

A money market account actually works a lot like the savings account structure that you’re already used to, even if the money market rates set it apart. You can distribute money, such as from a preexisting checking account, into the account freely. Unlike stricter savings setups, you can also move money back into other accounts or withdraw it directly from your money market account. You can even write checks from this account; although they, like other transaction types, may be limited to a certain number per term or annum.

So why are money market rates typically so much higher than savings accounts?Think of your current savings account like a little safe where you put your money in stacks and it sits there untouched until you need it again, watched over by bank security. Money market accounts operate differently, because instead of keeping your money in this imaginary bank vault, the bank actually takes it and gets to use it to make its own deposits and investments in the financial market.

Once the bank has made or lost money using yours as a basis, it still needs to repay you the initial sum that you loaned. Just like your savings account, if you’re using a financial agency backed by the Federal Deposit Insurance Corporation or FDIC, this initial amount put into the money market is still guaranteed to you – even if the bank completely mismanages the funds or even goes out of business. You’re still completely protected. It’s this agreement and understanding that your money can be applied but you can still access it and retract it plus interest at maturity that enables banks to offer higher money market rates.

To get started, you may need a higher minimum balance than you would with a savings account. So it makes sense to stay with your startup account until you’ve saved and earned a good amount of money. Even with great money market rates, you still stand to do better if you start with a strong initial investment upon which your growth rates can have the biggest and best impact.

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TM Murphy is a professional writer who lives in NYC. She currently specializes in fashion, beauty, marketing and finance articles. For easy-to-understand financial and banking advice to use on topics such as a money market rates, she often turns to http://www.discoverbank.com. TM Murphy has been writing full-time since 2006, when she graduated with a B.A. in English from Northeastern University.