Earn
more: MMAs usually
carry higher interest
rates than traditional
savings accounts. But
there is a wide range,
so if you want a high
rate, be prepared to
shop for it.
Liquid:
You can often get the
money by just writing
a check.
Availability:
MMAs can be opened at
many institutions --
in almost as many locations
as traditional savings
accounts.
Ease
of use: The owner
can often automate deposits.
It makes saving that
much easier.
Upfront
deposit: MMAs
may require more money
to establish. And some
accounts can also have
a minimum balance.
Check
limits: MMAs
usually come with limited
check-writing privileges.
This isn't an account
you can use casually.
When you take funds
from a money market
account, you want to
do some planning first.
That makes it better
for one-time or special
uses, such as making
a down payment on a
car or house. And if
it's your rainy day
fund, you're in the
middle of a financial
hurricane and you have
to live out of the money
in the account, just
use the transaction
privileges you have
to transfer money to
a checking account.
Fees
or penalties:
There may be fees for
going under the minimum
balance or initiating
too many transactions.
Just find out what the
rules are and stick
with them.
Money market accounts represent the next step up from the traditional savings account. Accounts sometimes require a little more cash to open than a savings account and may have a (higher) minimum balance, but many also offer a higher rate of return. The likely account holder will have a little more money accumulated and probably be a little more financially savvy.
Money
market accounts are "usually
better for people who are
looking for some return,
but want liquidity," says
Keith Leggett, senior economist
for the American Bankers
Association. But the account
holder needs to be the type
who can manage and balance
a check book, he says.
Once
you've accumulated those
three to six-months' worth
of expenses in a rainy day
fund, you'll have enough
to move it to a money market
account. Watch out for required
minimum balances -- can
you access enough funds
in an emergency without
taking it below the minimum?
Because check-writing is usually limited, this is a good option for paying those one-time expenses -- such as writing a check for a down payment on a car or home -- rather than a couple of trips to the grocery store.
It's also a good parking spot for money you've taken out of investments or cash you're preparing to invest.
Trying
to figure out which options
best match your savings
strategy? Here are several
key points to compare and
contrast at a glance.
