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Difference between Money Market and Savings Account
The majority of us believe that the future is more promising and exciting than ever before, yet our feelings and expectations about the future may and do shift throughout time. The global pandemic we all face when the COVID−19 virus sweeps the planet is the best example of how unpredictable the future may be. This taught us that the only thing we can count on is change and that no matter how much preparation we do, the future will always catch us off guard. You may, however, take care of your financial well−being by putting your money into an easily accessible money market or savings account.
When one's expenses surpass one's income, saving money becomes a significant challenge. But saving is essential for preparedness and safety in the future. Saving money is easy in theory but difficult in practice. Saving a certain amount each pay period is one of the most efficient ways to build a nest egg. But if your money just sits in a bank account doing nothing for you, it's not worth anything. So, people put their money in a savings or money market account where it is safe and earns interest. But which one is the greatest bet for the future?
What is a Savings Account?
A retail bank's most fundamental type of account is a savings account, where you may save your cash and earn interest on it. It's a savings account for those who don't blow their whole paycheck on goods and services but rather set away some of their earnings in case of unexpected expenses. A savings account can be opened by anybody at any retail bank or credit union and funded with money anytime.
The primary function of a savings account is to provide a place to save cash and collect interest on that amount. Most banks do not limit the amount you may deposit into a savings account and offer higher interest rates. Some financial institutions charge a nominal monthly fee for savings accounts but waive it if you deposit a specific amount into the account every month.
What is a Money Market Account?
A money market account (MMA), usually known as a savings account, is a savings deposit account maintained by financial organizations such as banks and credit unions. Like a savings account, a money market account (MMA) lets you put away money and receive interest. However, the rates given by MMAs are usually significantly greater than those offered by savings accounts. Like investing in a mutual fund, MMA is a team sport in which competitors work together to achieve a common goal.
Currently, banks, large corporations, and the federal government are all compelled to pay exorbitant interest rates to borrow money from the money market, which in turn generates profits for you. It's like a savings account in every way except that you're limited in the number of times you may make a deposit or withdrawal each month. Money market accounts are governed by Federal Reserve Regulation D and are thus insured by the Federal Deposit Insurance Corporation (FDIC). However, to qualify for the higher rates offered by MMAs that provide a higher yield, you will often need to maintain a larger minimum balance.
Differences: Money Market and Savings Account
The following table highlights how a Money Market Account is different from a Savings Account −
| Characteristics | Money Market Account | Savings Account |
|---|---|---|
| Account Type | MMA are comparable to a mutual fund in which you invest alongside other investors. | It is a standard bank or credit union savings account where you save your hard−earned funds. |
| Interest Rate | The interest rates are determined by the prevailing market rates. | It is guaranteed by a government body, and the interest rate is often fixed. |
| Flexibility | It enables convenient access to finances through debit cards and cheques. | It features restricted withdrawal and transfer possibilities and no debit card services. |
| Minimum Balance | It has a comparatively higher minimum balance and monthly fee requirements. | There are low minimum balance requirements and negligible monthly fees. |
Conclusion
Though both a savings account and a money market account allow you to deposit funds and earn interest on those funds, money market accounts often provide far higher interest rates.
In contrast to savings accounts, money market accounts often include a debit card and cheque facilities. Unlike savings accounts, checking accounts offer easy access to one's money and the writing of cheques. It's a smart move to create a savings account to protect and grow your funds because doing so is far less of a hassle and costs much less than creating other types of bank accounts. An individual who has a money market account has the benefits of both a savings bank account and a checking account.
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